Treasury Inflation-Protected Securities

Here comes a rather unexciting 5-year TIPS auction

Posted on April 19, 2026 by Tipswatch

By David Enna, Tipswatch.com

Unexciting? These days, maybe that’s a good thing.

The U.S. Treasury on Thursday will auction $26 billion of a new 5-year Treasury Inflation-Protected Security — CUSIP 91282CQP9. The real yield to maturity and coupon rate will be set by the auction results.

At Friday’s market close, the Treasury was estimating the real yield of a full-term 5-year TIPS at 1.28%. Unless yield trends change dramatically this week, this TIPS will get the lowest April result in four years.

Definition: The “real yield” of a TIPS is its yield above official future U.S. inflation, over the term of the TIPS. So a real yield of 1.28% means an investment in this TIPS would provide a return that exceeds U.S. inflation by 1.28% for 5 years.

Will the auctioned real yield end up at 1.28%? Maybe, but watch for continued volatility this week. Also, keep in mind that April’s 5-year TIPS auction tends to get a bit higher real yield than the “market” estimate, because of its closing-months exposure to potential deflation in non-seasonally-adjusted CPI.

Since the April 2025 auction, the Federal Reserve has cut its federal funds rate three times — a total of 75 basis points. Of all TIPS auctions, the 5-year term is the most sensitive to cuts in short-term interest rates. I think a real yield level around 1.30% to 1.35% seems reasonable. The Fed won’t be cutting rates anytime soon.

Here is the long view of the 5-year real yield over the last 23 years, showing that 1.28% remains relatively attractive, but well below the recent high of 2.51% in October 2023. Fed rate cuts began in September 2024.

Pricing

Because this is a new TIPS, Treasury will set its coupon rate to the 1/8th percentage point below the auctioned real yield. That means its unadjusted price will be slightly below par value. CUSIP 91282CQP9 will carry an inflation index of 1.00235 on the settlement date of April 30, which will slightly increase the investment cost and the principal purchased by investors.

I’d guess the coupon rate will end up being 1.25%. The investment cost should be near par value, meaning if you purchase $10,000 par value of this TIPS, you will be paying somewhere around $10,000.

Inflation breakeven rate

The 5-year Treasury note closed Friday with a nominal yield of 3.84%, creating an implied inflation breakeven rate of 2.56% using current Treasury estimates. That’s a high number, the highest since a 3.34% breakeven at the April 2022 auction, just as U.S. inflation was surging higher. (Inflation in April 2022 was running at 8.3%, compared to 3.3% today.)

Is 2.56% too high? Probably not, given the uncertain future of energy prices and potential pass-through costs. Inflation over the last five years, ending in March, has averaged 4.5%.

Here is the long view of inflation breakeven rates over the last 23 years, showing the dramatic peak in spring 2022:

Alternatives

The Series I Savings Bond can still be purchased this week with a fixed rate of 0.90%, which is fairly competitive with a 5-year TIPS at 1.28%. The I Bond offers rock-solid deflation protection, better compounding, tax deferral of interest, and a flexible maturity date.

The TIPS works best for setting aside a specific amount of inflation-adjusted cash for use 5 years into the future. The I Bond works best as a secondary emergency fund, storing inflation-adjusted cash for use when you need the money.

Best-in-nation 5-year bank CDs are yielding around 4.0%, just a bit better than the 5-year Treasury note. That pushes the inflation breakeven rate out to about 2.72%. I consider a 5-year CD paying 4% to be attractive. I’d prefer the TIPS, though, for the inflation protection.

Thoughts

Investors should be cautious in using brokerage yield predictions to forecast where this auction is heading. Vanguard right now is showing an “indicative yield” of 1.20% for this auction. That is most likely based on current trading in the most-recent 5-year TIPS, issued in October. The October TIPS gets a lower real yield than the April TIPS. More on this.

The Treasury’s daily estimate , currently 1.28%, is going to be a more reliable predictor. But remember that yields will be changing before the auction.

I won’t be buying at this auction because I already have filled the 2031 rung of my long-term TIPS ladder. For investors, a real yield of 1.28% for 5 years qualifies as both “not bad” and “not exciting.” But today’s real yields are much better than the auction result of April 22, 2021 … -1.631%.

This TIPS auction closes Thursday at 1 p.m. ET. Non-competitive bids at TreasuryDirect must be placed by noon Thursday. If you are putting an order in through a brokerage, make sure to place your order Wednesday or very early Thursday, because brokers cut off auction orders before the noon deadline.

I will be posting the auction results soon after the close on Thursday. Here is a history of results for this term over the last 5 years:

• Confused by TIPS? Read my Q&A on TIPS

• TIPS in depth: Understand the language

• TIPS on the secondary market: Things to consider

• TIPS investor: Don’t over-think the threat of deflation

• Upcoming schedule of TIPS auctions

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Donate? This site is free and I plan to keep it that way. Some readers have suggested having a way to contribute. I welcome donations, any amount. And FYI, ads on this site pay for about one visit to Costco.

PayPal link / Venmo link

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Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear. Please stay on topic and avoid political tirades. NOTE: Comment threads can only be three responses deep. If you see that you cannot respond, create a new comment and reference the topic.

David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.

Posted in Bank CDs, Federal Reserve, I Bond, Inflation, Investing in TIPS, Savings Bond, TreasuryDirect | Tagged investing, personal-finance, Treasury investments | 11 Comments

I Bond dilemma: Buy in April or just keep waiting?

Posted on April 12, 2026 by Tipswatch

I am buying in April. A lot of you will disagree. There is no wrong answer.

By David Enna, Tipswatch.com

Let’s take a moment to ponder what happened in March: The United States went to war in the Mideast, gas prices surged higher, the stock market fell into chaos (briefly) and U.S. inflation took a huge leap higher.

Way down on our list of concerns was: What’s going to happen to Series I Savings Bonds at the May 1 rate reset? On February 27, I would have confidently told you:

The variable rate was going to fall to about 2.0% from the current 3.12%.
The fixed rate was going to fall to 0.8% from the current 0.9%.
And the composite rate would fall (for I Bonds purchased from May to October) to about 2.81%, down from the current 4.03%.

Wrong. Wrong. Wrong.

But before we get into that, let’s look at …

I Bond basics

I Bonds are U.S. government savings bonds designed to protect your savings from inflation. They offer a combination of interest rates that adjust for inflation, making them a popular choice for conservative investors.

The fixed rate of an I Bond will never change. Purchases through April 30, 2026, will have a fixed rate of 0.90%, which means the return will exceed official U.S. inflation by 0.9% until the I Bond is redeemed or matures in 30 years. The fixed rate will reset on May 1.
The inflation-adjusted rate (often called the I Bond’s variable rate) changes each six months to reflect the running rate of inflation. That rate is currently 3.12%, annualized, for six months. It will adjust again on May 1, 2026, rolling into effect for all I Bonds, no matter when they were purchased.
The current composite rate is 4.03% annualized for six months for purchases through April 2026.

I Bonds are an extremely safe and conservative investment. Interest accrues monthly and principal can never decline, even in times of deflation. Investments are limited to $10,000 per person per calendar year for electronic I Bonds held at TreasuryDirect. There is also a “gift box” strategy some investors use to stack purchases for future years.

I Bonds have many positives. For example, earnings are free of state income taxes and federal taxes can be deferred until the I Bond is redeemed or matures. Also, I Bonds are a simple investment to buy and track, much simpler than a TIPS with a constantly changing market value and inflation accruals that update daily.

The variable rate

This is set in stone: Because of March’s lofty inflation, the I Bond’s inflation-adjusted variable rate will rise from the current 3.12% to a new rate of 3.34%. This is based on non-seasonally adjusted inflation for the months of October 2025 to March 2026, an increase of 1.67%. The I Bond’s rate-setting formula doubles the six-month inflation rate to create the new variable rate.

View historical data on my Inflation and I Bonds page.

All I Bonds, no matter when they were issued, will eventually get the variable rate of 3.34% for six months, with the starting month depending on the original purchase month. From TreasuryDirect:

It’s important to remember that the new variable rate will apply to all I Bonds ever issued (no I Bonds have yet matured). A purchase in April will get that new, higher variable rate starting in October.

Conclusion: The I Bond’s variable rate will rise to 3.34% at the May 1 reset.

The fixed rate

The Treasury has no legal requirement or public formula for setting the I Bond’s fixed rate. The decision is at “the discretion of the Treasury Secretary.” However, we know Treasury tracks trends in real yields and adjusts accordingly. This forecasting formula has worked for the last decade: Take the average real yield of the 5-year TIPS over the preceding six months and apply a ratio of 0.65.

For this reset, we are interested in 5-year real yields from November 2025 to April 2026. There are only 13 market days left before the reset, so we can now get a solid projection:

The formula, which has been accurate for a decade, projects that the fixed rate will remain at the current level, 0.9%. That would be true even if the 5-year real yield — currently at 1.36% — suddenly plummeted to an average of 1.10% for the next 13 market days.

However … This projection is based on 10 years of Treasury history in setting the I Bond’s fixed rate. But the Treasury could change course at any time and we should be aware of that. President Trump’s first-term Treasury followed the formula and has continued to do so in his second term.

Conclusion. It looks highly likely that the I Bond’s fixed rate will hold at 0.90%.

Composite rate

If we assume the fixed rate holds at 0.90% and the variable rate rises to 3.34%, we are looking at a new composite rate of 4.26%, up from the current 4.03%, for I Bonds purchased from May to October 2026. This is based on the formula the Treasury uses to calculate the composite rate:

[Fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)]

If I did my math right, this formula results in the composite rate of 4.26%.

This same annualized composite rate, 4.26%, will apply to I Bonds purchased in April, after six months of earning the current rate of 4.03%.

So we know that an investor purchasing in April will earn 4.03% for six months and then 4.26% for six months, earning a combined rate of 4.16%. An investor purchasing any time from May to October will earn 4.26% for the first six months and then an undetermined rate for the next six months.

Conclusion. The I Bond’s composite rate will rise to 4.26% at the May 1 reset.

The buying decision

Buy now. As I noted at the top, I will buy my full allocation of I Bonds ($10,000 per person per year) later in April. With that decision, I know I will earn 4.16% over the next 12 months, while retaining the permanent 0.90% fixed rate. This is the “sure thing” decision, and I happen to have cash available to make the purchase.

If you are buying in April, I recommend setting the purchase date no later than April 28 on TreasuryDirect to make sure it gets processed ahead of the rate shift.

Buy later. Buying in May would be fine, but most investors who don’t buy in April will hold off investing until at least October 14, when the September inflation report is released and sets the next variable rate, to be reset November 1. At that point investors will also have a very good idea of the next fixed rate.

If you think the fixed rate could be rising in November, it makes sense to wait. Using our standard formula, the 5-year average real yield would need to rise to 1.47% over the next six months to boost the fixed rate to 1.0%. That isn’t unreasonable. So waiting could make sense.

One thing to consider is that the fixed rate announced in November will be available for purchases through April 2027, when the purchase cap resets. Also, realize that a 10-basis-point increase in the fixed rate amounts to $10 a year on a $10,000 investment. It’s not life changing.

Risks of buying now. The fixed rate soars higher in November and you feel miserable about your impatient purchase. (Not likely, but anything can happen.)

Risks of buying later. The biggest risk (also slim) is that the Treasury tosses out its traditional rate-setting formula and drops the I Bond’s fixed rate at the May reset. Another more possible risk, but not as important financially, is that inflation will plummet from April to September and the November variable rate is lower than the current 3.12%.

Short-term investment?

A combined composite rate of 4.16% looks attractive when you compare it to the nominal yields of a 4-week (3.67%) or 1-year (3.70%) T-bill. But remember that you have to hold an I Bond for one year and if you redeem at that point you lose the latest three months of interest.

Not worth it. If you buy late in April and then redeem in April 2027, you will lose the last three months of interest, meaning your total return would be 3.08%. You can do better buying a 1-year T-bill.

Rolling over I Bonds

If you are holding I Bonds with 0.0% fixed rates, you are currently earning a composite rate of 3.12%, and that will rise to 3.34% when the new variable rate kicks in. That’s not bad. There’s no reason to rush to sell these, but if you need to raise cash to purchase 0.90% I Bonds, redeeming and repurchasing makes sense.

I generally encourage people to continue holding I Bonds “until you need the cash.” It’s great to have these savings bonds growing tax-deferred with zero risk.

If you do a roll over, you will owe federal income taxes on the interest earned, and if your withdrawal is more than $10,000 (because of earned interest) you’ll only be able to buy $10,000 in new I Bonds in 2026. Also, time your redemption for early in the month because you earn no interest in the month of redemption.

Gift-box strategy

I don’t think there is a compelling need to “load up” on I Bonds in 2026, but that might change later in the year if the fixed rate surges higher. Although I have used it, I am not a fan of the gift-box strategy, mainly because the Treasury has made no attempt to clarify the rules and in fact has muddied the waters.

Conclusion

When should you purchase? There is no wrong answer. Buying in April or later in the year will likely generate similar financial returns. Getting an I Bond with a fixed rate of 0.90% remains attractive. This is a personal decision, but I still encourage investing in I Bonds as an inflation-adjusted, tax-deferred store of cash.

What are your investment plans? Discuss in the comments section!

• Confused by I Bonds? Read my Q&A on I Bonds

• Let’s ‘try’ to clarify how an I Bond’s interest is calculated

• Inflation and I Bonds: Track the variable rate changes

• I Bonds: Here’s a simple way to track current value

• I Bond Manifesto: How this investment can work as an emergency fund

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Donate? This site is free and I plan to keep it that way. Some readers have suggested having a way to contribute. I would welcome donations. Any amount, or skip it, your choice. This is completely optional.

PayPal link / Venmo link

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Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Posted in Cash alternatives, Federal Reserve, I Bond, Inflation, Savings Bond, TreasuryDirect | 63 Comments

March inflation sets I Bond’s new variable rate at 3.34%

Posted on April 10, 2026 by Tipswatch

U.S. all-items inflation rose 0.9% in March to an annual rate of 3.3%.

By David Enna, Tipswatch.com

The March inflation report — a stunner, but not a surprise — showed that non-seasonally-adjusted all-items inflation rose 0.9% for the month, matching expectations after a massive surge higher in energy costs. The annual inflation rate rose to 3.3%, up from 2.4% in February.

This report is one of the most important of the year for investors in U.S. Series I Savings Bonds, because March inflation marks the end of a six-month string that will reset the I Bond’s variable rate on May 1. This is based on non-seasonally-adjusted inflation for the months of October 2025 to March 2026.

For March, the Bureau of Labor Statistics set the CPI Index at 330.213, an increase of 1.05% for the month. That resulted in an increase of 1.67% for the six-month rate-setting period, meaning the I Bond’s new inflation-adjusted variable rate will be 3.34%, up from the current 3.12%. Here are the data:

All I Bonds, no matter when they were issued, will eventually get the variable rate of 3.34% for six months, with the starting month depending on the original purchase month. The I Bond’s fixed rate will also be reset on May 1, but it looks likely to continue at 0.9%, meaning the new composite rate would be 4.26%, up from the current 4.03%.

An investor purchasing I Bonds in April will get a six-month annualized return of 4.03%, and then 4.26% for six months. But there is plenty of time to consider when to invest. Purchases through the end of April earn a full month of interest. I will be writing more on this “when to buy?” topic on Sunday.

What this means for TIPS

The Treasury uses non-seasonally-adjusted inflation in March to set daily inflation indexes for Treasury Inflation-Protected Securities in May. The March report means that principal balances for all TIPS will rise 1.05% in May, after rising 0.47% in February. Here are the new May Inflation Indexes for all TIPS.

The inflation report

Because of the extreme disruption to global energy markets in March, economists were expecting a dramatic surge higher in all-items inflation. The increase of 0.9% for the month met expectations.

Core inflation came in slightly below expectations for both the month and year, which could help soothe financial markets. But a jump in annual inflation from 2.4% in February to 3.3% in March is stunning. That is the highest annual inflation rate since April 2024.

And the trend could continue in April when missing housing data from October are added back into the CPI report. Because of the government shutdown, the BLS assumed zero increase in shelter costs in the month of October. That was highly unlikely. Here is the annual trend for all-items and core inflation, showing the remarkable gap in data:

In addition, in this March report the BLS said U.S. gasoline prices rose 21.2%, which indicates it did not capture the full month of price increases. The national average gas price started the month at about $3.15 and ended the month at about $4.16. That is an increase of 32% and prices have continued rising in April. This trend will continue.

Also in the March report:

Fuel oil prices rose a whopping 30.7% and are now up 44.2% for the year.
The overall energy index was up 10.9% in March, the highest increase since September 2005.
Food at home costs declined 0.2% and were up only 1.9% for the year. This trend could reverse as delivery costs begin to rise.
Shelter costs were up 0.3% and 3.0% for the year. We could see a bump higher in April as the missing October data are replaced by April survey numbers.
Apparel costs rose 1.0% in March after rising 1.3% in February.
Airline fares rose 2.7% for the month and are up 14.9% year over year.
New vehicle costs rose 0.1% for the month and are up only 0.5% for the year.
Prices of used cars and trucks fell 0.4% in March and were down 3.2% for the year.

The one bright spot in the March report is that food costs have moderated (egg prices were down 3.4%), but as I noted this progress could be stalled because of rising delivery costs caused by soaring gas prices.

What this means for interest rates

The current Federal Reserve isn’t going to budge interest rates higher or lower as the nation adapts to the inflationary shock of global gas prices. So I’d expect short-term interest rates to remain stable in the near term.

The core inflation numbers were slightly better than expected, which should help to soothe market jitters. But energy costs are a major concern. From Bloomberg’s report this morning:

The data underscore how the war in the Middle East is beginning to ripple through the US economy, worsening the affordability woes many households have faced in recent years. Americans are already experiencing higher prices at the pump, and service providers including Delta Air Lines Inc. and the US Postal Service have warned of price hikes ahead. …

“Looking ahead, we expect a similarly sized rise in headline CPI in April,” Kathy Bostjancic, the chief economist at Nationwide, said in a note after the release. “Even if a long-lasting deal to end the war is reached and the Strait of Hormuz is fully re-opened, it would take months for oil, gasoline, diesel and other commodity supplies to snap back to pre-war levels.”

The chaotic events of March reaffirm my long-standing commitment to allocating a portion of my investment portfolio to inflation protection, in the form of I Bonds and TIPS. These investments provide insurance. It’s best not to need the insurance, but comforting when you do need it.

If you are just learning about these investments, read these:

• Confused by I Bonds? Read my Q&A on I Bonds

• Confused by TIPS? Read my Q&A on TIPS

• TIPS in depth: Understand the language

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Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Posted in Cash alternatives, I Bond, Inflation, Investing in TIPS, TreasuryDirect | 15 Comments

A 5-year TIPS is maturing April 15. How did it do as an investment?

Posted on April 5, 2026 by Tipswatch

CUSIP 91282CCA7 had one of the ugliest TIPS auctions in history. And yet … it did well versus a nominal Treasury.

By David Enna, Tipswatch.com

Back in April 2021 I was out-of-my-mind frustrated by ultra-low real and nominal yields that offered little chance to surpass inflation. In those days, elite money market funds were yielding about 0.01% as the Federal Reserve held short-term interest rates near zero.

So I was intrigued (more out of boredom than financial sense) by the Treasury’s auction on April 22, 2021 of a new 5-year Treasury Inflation-Protected Security, CUSIP 91282CCA7. At the time, I was interested in “nibbling” into TIPS auctions after a long spell on the sidelines.

But I decided against a purchase. In my preview article for that auction I noted:

As of Friday’s market close, the Treasury was estimating the real yield to maturity of a 5-year TIPS at -1.73%, meaning an investor would be willing to receive a return that trails official U.S. inflation by 1.73% over the next five years.

Investors are going to pay a premium of about 9% above par for this TIPS, and then will receive coupon interest of 0.125% plus accruals to principal matching inflation over 5 years.

In closing, I noted that I Bonds were the superior investment:

You can purchase a U.S. Series I Savings Bond today and get a fixed rate of 0.0%, which means its real yield is 0.0% and your investment will very closely match future U.S. inflation for as long as you hold the I Bond. That is a 173-basis-point advantage over a 5-year TIPS.

At its originating auction, CUSIP 91282CCA7 got a real yield to maturity of -1.631%, which at the time was the lowest real yield at auction for any TIPS in history.

How did CUSIP 91282CCA7 do?

The February 2026 inflation report, issued March 11, closed the books on this TIPS. It will end with an inflation index of 1.24296 on the April 15 closing date. That reflects cumulative inflation of 24% over five years.

CUSIP 91282CCA7 ended up providing a nominal return of 2.715% over the next five years. At the time, a 5-year Treasury note had a nominal yield of just 0.82%, an incredibly low number. So the TIPS ended up outperforming the nominal Treasury by an annual rate of 1.89%.

Why did the TIPS outperform? When it was issued, it had an inflation breakeven rate of 2.45%, a very high number coming out of a decade of low inflation. But by April 2021 inflation had already started surging higher, with the annual rate rising from 1.2% in November 2020 to 4.2% in April 2021 — eventually reaching a high of 9.1% in June 2022.

In the five years after April 2021, inflation averaged 4.3%, well above the inflation breakeven rate of 2.45%. And that resulted in the TIPS outperforming the nominal Treasury. This result continues a six-year string of out-performance of TIPS over nominal Treasurys.

View historical data on my TIPS vs. Nominals page.

I Bonds were the winner

If you purchased an I Bond in April 2021, it had a fixed rate of 0.0%, much more attractive than the auctioned yield of -1.631% for this TIPS. By April 2026, the value of the I Bond had increased 24%, for an annual return of about 4.3% — easily exceeding the 2.7% for the TIPS or 0.8% for the nominal 5-year Treasury at the time. (Source: Eyebonds.info).

How about bond funds?

Vanguard’s Total Bond Fund (BND) has had a total annual return of 0.25% over the last five years, according to Morningstar. That poor performance was caused by the beating it took in 2022, when its annual return was -13.1%.

The iShares TIPS ETF (TIP), which holds the full range of maturities, has had a total annual return of 1.25% over the last five years, also under-performing CUSIP 91282CCA7.

Vanguard’s Short-Term TIPS ETF (VTIP) has had a total annual return of 3.46% over the last 5 years, better than CUSIP 91282CCA7’s performance. It benefits from a shorter duration and counter-acting gains from higher inflation.

There’s a lesson here

Two very important takeaways: 1) An I Bond with a fixed rate of 0.0% will be a very attractive investment any time the Federal Reserve decides to repress interest rates through quantitative easing. And 2) Even a TIPS with a negative real yield can be “relatively” attractive if the inflation breakeven rate is lower than seems likely.

Side note: I eventually did make a small purchase ($5,000 par) of CUSIP 91282CCA7 at the June 17, 2021 reopening auction when it got a real yield to maturity of -1.416%. The investment amount was $5,480 — a steep premium because of the negative yield.

This June 2021 version had a slightly better nominal return of 2.767%. The payout on April 15 will be $6,214.80, plus one final, very small coupon payment.

Notes and qualifications

My TIPS vs. Nominals chart is an estimate of performance.

Keep in mind that interest on a nominal Treasury and the TIPS coupon rate is paid out as current-year income and not reinvested. So in the case of a nominal Treasury, the interest earned could be reinvested elsewhere, which would potentially boost the gain. For certain, we don’t know what the investor could have earned precisely on an investment after re-investments.

In the case of a TIPS, the inflation adjustment compounds over time, and that will give TIPS a slight boost in return that isn’t reflected in the “average inflation” numbers presented in the chart.

• Confused by TIPS? Read my Q&A on TIPS

• TIPS in depth: Understand the language

• TIPS on the secondary market: Things to consider

• TIPS investor: Don’t over-think the threat of deflation

• Upcoming schedule of TIPS auctions

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PayPal link / Venmo link

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Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Posted in Cash alternatives, Federal Reserve, I Bond, Investing in TIPS, Savings Bond | 14 Comments

I Bond’s fixed rate is likely to hold at 0.90% at May 1 reset

Posted on March 29, 2026 by Tipswatch

The Series I Savings Bond currently has a six-month composite rate of 4.03%.

By David Enna, Tipswatch.com

I realize that the fixed rate of the U.S. Series I Savings Bond isn’t top of mind for many investors at the moment, given an active war in the Mideast, soaring gas prices, and sharp declines in both the stock and bond markets. But in our little inflation-watching community, it’s a big deal.

Both the I Bond’s permanent fixed rate and inflation-adjusted variable rate will be reset May 1 for purchases from May to October 2026. Before the outbreak of war on Feb. 28 it appeared likely the I Bond’s fixed rate would fall from the current 0.90% to 0.80%. And it also seemed likely the composite rate would fall well below the current 4.03% because of a decline in the variable rate.

The fixed rate is important because it is permanent for the potential 30-year life of the I Bond. It represents the I Bond’s “real yield” above inflation. March’s surge in both prices and interest rates has changed the likely result of the May 1 reset.

(For more on the basics of I Bonds and potential buying strategies, read my Jan. 25 article: “I Bond buying guide for 2026: Wait it out.”)

Although the U.S. Treasury does not reveal its formula for determining the I Bond’s fixed rate, we know Treasury tracks trends in real yields and adjusts accordingly. This forecasting formula has worked for the last decade: Take the average real yield of the 5-year TIPS over the preceding six months and apply a ratio of 0.65.

The next rate reset will come May 1, so we are interested in real yields from November 2025 to April 2026.

Real yields surged higher in March. Click on image for larger version

The before. On Feb. 27, one day before hostilities broke out, the 5-year real yield had fallen to 1.11% and looked likely to continue in a range below 1.20%, which would have dropped the I Bond’s fixed rate to 0.80% at the May 1 reset.

The after. At Friday’s close, the Treasury was estimating the 5-year real yield at 1.50%, up 39 basis points for the month, so far. The current trend — it appears — would have the 5-year real yield solidly above 1.30% in April.

Let’s look at how the equation has changed.

In this chart, the projection is calculated using a 0.65 ratio of the average daily 5-year real yield from November 1, 2025, to March 27, 2026. Using that data, the real yield average is 1.33% and results in an I Bond projection of 0.90%.

1.331515152 x 0.65 = 0.8655%. The I Bond’s fixed rate is always rounded to the tenth decimal point, so the current projection is 0.90%.

That projection holds even if the 5-year real yield drops to the 1.30% range for the 23 remaining market days until the May 1 reset. It would take a fall to an average of 1.20% for those 23 days to cause the projection to fall to 0.80%. That kind of fall is unlikely, even if the Iran hostilities are resolved quickly.

It is even more unlikely that the I Bond’s fixed rate will rise above the current 0.90%, which would require a massive move higher in real yields to balance off five months of accumulated data.

Conclusion. It looks highly likely that the I Bond’s fixed rate will hold at 0.90%.

Qualifications

This projection is based on 10 years of Treasury history in setting the I Bond’s fixed rate. But the Treasury could change course at any time and we should be aware of that. President Trump’s first-term Treasury followed the formula and has continued to do so in his second term.

What about the variable rate?

The March inflation report will be issued April 10 at 8:30 a.m. and we will get the final piece needed to know the I Bond’s inflation-adjusted variable rate, which will roll into effect for all I Bonds ever issued, depending on the original month of purchase.

Here are the data so far:

At the end of February — if we assumed moderate inflation in March — we were looking at a potential variable rate of about 2%, well below the current 3.12%.

But soaring gas prices in March — up nearly 40% for the month — are likely to trigger a dramatically higher non-seasonally adjusted inflation rate for that month. The Cleveland Fed’s Nowcasting page is projecting a rate of 0.76% for all-items inflation in March. That is a seasonally adjusted number, so the actual non-seasonally adjusted number for March could be 1.0% or higher.

Conclusion. If we get 1.0% non-seasonally adjusted inflation in March, the variable rate would soar to 3.22% and we would be looking at a composite rate of about 4.2% for six months for purchases from May to October 2026.

Is there a strategy?

Yes. The strategy remains the same as I wrote in January: “Wait it out.” We will get the March inflation number on April 10 and then we will have more than two weeks to contemplate purchasing I Bonds in April, in May, later in the year, or not at all.

If the I Bond’s fixed rate looks likely to hold at 0.9%, and the composite rate will be competitive with the current 4.03%, there will be less incentive to buy I Bonds in April. And in fact, the logical path might be to see how rates develop before the November 1 reset.

An I Bond earns the then-current composite rate for six full months before transitioning to a new variable rate. So a purchase late in May would be financially equivalent to a purchase late in October.

Although real yields are climbing (and could remain elevated) I Bonds remain an attractive inflation-adjusted investment, earning tax-deferred interest, exempt from state income taxes, and with rock-solid deflation protection.

April is going to be an interesting month. I will have more to say on this topic after we see that March inflation report.

• Confused by I Bonds? Read my Q&A on I Bonds

• Let’s ‘try’ to clarify how an I Bond’s interest is calculated

• Inflation and I Bonds: Track the variable rate changes

• I Bonds: Here’s a simple way to track current value

• I Bond Manifesto: How this investment can work as an emergency fund

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