Is that correct? According to the TreasuryDirect website, you can't redeem a bond within the first year. If a bond is less than 5 years old, you pay a 3 month interest penalty.
That is correct. It's twelve months instead of six. I was mistaken. Generally speaking an emergency fund should be 3-6 months of income. I justified the illiquid period by moving a third of my fund into it at a time.
The interest "penalty" is simply not getting back the interest accrued in the prior three months.
The interest "penalty" is simply not getting back the interest accrued in the prior three months.