By David Enna, Tipswatch.com

A new research paper by a Marquette University professor found that Series I Savings Bonds created annual returns substantially higher than high-yield savings accounts (HYSAs) between 1999 and April 2026.

The emeritus professor, Dr. David Krause, is the founding director of the university’s Applied Investment Management program. His academic focus encompasses investments, economics, statistics, and financial technology.

Krause’s paper is titled “High-Yield Savings Accounts vs. Series I Bonds: Which Is Better for Beating Inflation?” You can download a .pdf version here. This is from the abstract:

The historical analysis reveals that I Bonds delivered an average annualized real return of positive 0.83% over the 27 year sample period, while HYSAs delivered a negative 0.91% real return. …

I conclude that for investors with a holding period of at least one year, I Bonds offer a superior structural hedge against inflation compared to HYSAs. The $10,000 annual purchase limit remains the primary constraint for larger portfolios.

Krause notes that as of April 2026, U.S. inflation was running at 3.8%, but the national average interest rate on a standard savings account was just 0.38%. In response, many savers are turning to I Bonds and HYSAs to safely boost returns.

What is an HYSA? High Yield Savings Accounts are deposit accounts offered primarily by online banks and credit unions, Krause notes. They provide significantly higher annual percentage yields than savings accounts at traditional banks.

The Federal Reserve does not track HYSA rates, and data for years past are slim, so Krause created a “proxy” using an adjustment to the 1-year Treasury bill rate, currently 3.88%. Compare that to best-in-nation HYSAs at around 4.0%. Ken Tumin, who tracks savings yields on this site, posted this chart recently on X.com:

These best-in-nation yields are unusual, however, and note the declines from recent highs. A credit union where I have an account currently offers an HYSA with a yield of 3.2%. Similar products are Vanguard’s Cash Plus account at 3.35% or Fidelity’s Cash Management account with a money market fund yielding 3.29%. Tumin has noted:

Krause writes:

As of May 2026, top tier HYSAs offer APYs between 4.0% and 4.1%. However, these rates are variable and change at the discretion of the issuing institution. Unlike I Bonds, HYSA rates have no direct contractual link to inflation. They may fall even as inflation rises, a phenomenon observed during the 1970s and again during the post 2008 period. …

My central finding is that while HYSAs offer superior liquidity, I Bonds provide a superior structural hedge against inflation.

Here is a key illustration from the Krause study, showing a comparison of above-inflation returns for I Bonds versus HYSAs:

Krause’s research showed that I Bonds offered substantially better returns — and better protection against inflation — than HYSAs over the 27-year period.

I Bonds delivered positive real returns in 239 of 310 months, which represents 77.1% of the sample period. The average annualized real return was positive 0.83%. Even during challenging periods such as the 2008 financial crisis and the 2022 inflation spike, I Bonds maintained positive or only slightly negative real returns due to their inflation linked variable rate and the principal floor.

HYSAs delivered positive real returns in only 99 of 310 months, which represents just 31.9% of the sample period. The average annualized real return was negative 0.91%. HYSA real returns turned negative during every significant inflation acceleration. These periods included 2000 to 2001, 2005 to 2006, 2008 briefly, 2011, and most dramatically in 2021 to 2023. At the trough of the 2022 inflation spike, HYSA real returns fell to negative 0.61% on a monthly basis.

And here is another important illustration from the study:

Keep in mind that the chart shows the effect of inflation on purchasing power, so these are inflation-adjusted returns, not nominal returns. Krause points out:

In nominal or non-inflation adjusted terms, both investments grew. However, inflation eroded the HYSA purchasing power below its initial level. The I Bond, by contrast, preserved and modestly enhanced purchasing power despite two severe inflation shocks in 2008 and 2022 and a prolonged period of near zero interest rates from 2010 to 2021.

Liquidity and Penalty Considerations

Krause looked at the early-withdrawal penalty for I Bonds and found that early redemption substantially reduced the one-year real return, down to 0.19% versus 0.87% for current I Bonds held five years.

This finding suggests that I Bonds are best suited for funds that can be committed for at least two to three years. For true emergency funds requiring immediate access, a HYSA may be more appropriate despite its lower expected return.

Conclusion

Krause notes that “I Bonds have historically provided superior inflation protection compared to HYSAs.” That trend, Krause believes, will continue into future years:

This advantage is projected to continue based on forward looking scenario analysis. The mechanism is clear. I Bonds have a direct contractual link to the Consumer Price Index through their variable rate. HYSAs depend on the monetary policy transmission mechanism, which introduces lags and uncertainty.

The fixed rate component of I Bonds is particularly valuable. Currently at 0.90%, it guarantees a positive real return regardless of inflation before accounting for taxes. HYSAs offer no such guarantee.

I Bonds versus 4-week T-bills

I am definitely not an academic researcher, but I did get a small mention in Krause’s paper. In my case, I have been tracking the performance of the I Bond’s variable rate (minus any fixed-rate adjustment) versus the returns of 4-week Treasury bills.

The pure variable-rate yield is reflected in I Bonds with a 0.0% fixed rate. Those aren’t highly attractive these days, with the fixed rate now set at 0.9% and looking likely to rise higher at the November 1 reset.

Here is how this performance stacks up, looking ONLY at the I Bond’s variable rate versus the then-current 4-week T-bill yield.

Even without the effect of any fixed rate, I Bond yields on average have surpassed both 4-week T-bill yields and the U.S. inflation rate since 2011. Why did this happen? Because for many years after 2011 the Federal Reserve held short-term interest rates well below the U.S. inflation rate (a trend that has now returned). The April 2026 inflation rate of 3.8% is shown in the chart, and May’s annual rate is expected to be higher. We will get the May 2026 report Wednesday morning.

Add in the fixed rate, and obviously the performance becomes much better. For example, the current six-month composite rate is 4.26%, much better than the 4-week’s nominal yield of 3.71%. Here is a chart generated by Claude AI that compares the I Bond’s composite rate versus the top HYSA rate over the last 20 years:

There are times of I Bond under-performance, but those are minimal compared to strong out-performance by I Bonds during inflationary surges.

Final thoughts

I Bonds purchased today offer the advantage of a guaranteed 0.9% return above U.S. inflation, for as long as you hold the bond. High-yield savings accounts could surpass inflation, but there is no guarantee. And the interest rate could fall if market trends send short-term rates lower.

There is a use for both investments. I Bonds work well for holdings of five years or longer and T-bills and HYSAs for short-term cash needs. Krause notes:

For the retail investor asking which is better for beating inflation, the historical and forecast evidence points clearly to Series I Savings Bonds.

• 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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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.