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“If the Series I bond yield becomes less attractive over time as interest rates rise on regular savings accounts or CDs, you do have the ability to sell the bond after holding it for one year.

“Note that while the inflation rate is adjusted every May and November, the interest rate on your particular bond will be updated on a six-month schedule, based on the issue date,” says Jones. If inflation drops, the rate of the Series I bond is likely to drop. The next adjustment period starts at the beginning of November 2022, and could be affected by any interest rate hikes the Federal Reserve implements to help rein in inflation. The Series I bonds currently being issued have a fixed interest rate of 0% and the overall rate is structured to compensate for the U.S. Most of the current yield on Series I savings bonds is related to the variable part of the rate, which can change every six months, says Jones.

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“For example, if inflation is rising at 7%, then I bonds will adjust their rate to pay just a bit above that amount to entice investors.” When Will Series I Interest Rates Update and How Will It Change? “I bonds address the problem of inflation by setting their interest rates based on the consumer price index,” he says. Historically inflation has a negative impact on bonds, as it lowers the future value at maturity, Matthews explains. Together, these rates are expressed as the composite rate, currently 9.62%. Variable rate: Changed regularly, depending on the inflation rate.Base rate: Fixed for the life of the bond.The bonds were first issued in 1998 and are made of two parts: Series I savings bonds adjust to protect the principal dollar value from eroding under inflation (hence the “i,” which stands for inflation). Series I Savings Bonds Rates Compared to Inflation

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“We’ve seen historic levels of inflation, and I bonds are inflation-protected, making them a popular choice for investors to protect their purchasing power in the future,” says Kevin Matthews II, M.S., a former investment advisor and author of “ Starting Point: How to Create Wealth That Lasts.” “This protection has been top of mind given our financial environment.” The bonds hold particular appeal for investors who are looking for something secure that can help balance inflation. The Treasury Department offers a savings bond calculator on its website where you can run the numbers to see how much you can earn over time. That means the bonds make the most sense if you can afford to put the money aside long-term. You need to hold them for at least one year, and if you redeem them after less than five years, you forfeit the previous three months of interest. I bonds earn interest for 30 years, as long as you don’t cash them in before then. “It’s for investors who are looking for safety and inflation protection, because it’s backed by the U.S. CDs currently offer returns that are generally below 1%.Īnd there’s a security that comes with buying a Series I bond. The new rate is well above that of a CD, or certificate of deposit, in which your money sits in an account for a set period of time. Series I savings bonds, however, are connected to the inflation rate, so they offer an opportunity right now. What Are Series I Savings Bonds?įederal savings bonds don’t normally offer high yields. To figure out whether a Series I savings bond makes sense for you, here’s what you should consider, according to three experts. Series I savings bonds are offering a guaranteed return in line with conservative expectations of what investors can expect from the stock market based on its performance over the last 50 years. “Concerns about inflation make investments like Series I bonds attractive.” “Investors are hungry for any safe investment that is providing a good return,” says Bridget Jones, founder and coach at Smart Sister Finance, a financial education resource aimed at women. “When you see a rate at 6%+, you suddenly see a lot of interest from investors, so we’re getting a lot of questions there.” The previous rate of 7.12% was already garnering a heap of demand. “I bonds are something that didn’t make headlines for years,” says Collin Martin, director of fixed income at the Schwab Center for Financial Research. The stock market is stumbling, and the recent 40-year high wave of inflation, which was 9.1% in June, an inflation-protected Series I savings bonds have drawn new interest from savers and investors. The Treasury Department announced the new rate on May 2, which is active through October this year. Savings bonds are as old-school a money tool as you’ll find, but one type in particular is having a real moment, with a historic rise to a 9.62% annual rate.

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