I Bonds Set to Pay 9.62% Through October

Because of the way rates are set on I bonds, people holding older bonds may be earning double-digit rates. An I bond rate has two parts: a fixed rate, set when the bond is issued, which stays the same for its 30-year life, and a variable rate, which is based on the six-month change of the Consumer Price Index and can reset twice a year, in May and November. The Treasury Department applies a formula to combine the two into a composite rate.

The fixed-rate component is currently zero — but it has been 3 percent or higher in the past. I bonds purchased through early 2001 are currently earning more than 13 percent, if holders haven’t already redeemed them, according to the government’s TreasuryDirect website.

The Treasury Department doesn’t disclose its formula for setting the fixed rate, Mr. Tumin said. But as the Federal Reserve raises its benchmark interest rate, it seems “more likely” that the fixed rate on I bonds could nudge up at the next reset in November, Mr. Tumin said.

I bonds are considered quite safe. While it’s possible that the combined rate could fall to zero (it has happened before), it’s guaranteed not to go below that — so you’ll at least get your initial investment back when you redeem the bond, according to the Treasury Department.

You can acquire up to $10,000 in I bonds per person, per year, on TreasuryDirect.gov. Plus you can buy up to $5,000 more using your federal income tax refund. (A couple filing a joint tax return can buy up to $25,000 per year.)

Article source: https://www.nytimes.com/2022/05/03/business/inflation-bonds-rates.html