Treasury Inflation-Protected Securities

I Bond gets a new fixed rate of 1.10%, composite rate of 3.98%

Posted on April 30, 2025 by Tipswatch

A predictable result in unpredictable times.

By David Enna, Tipswatch.com

The U.S. Treasury held to past practices today, setting the new fixed rate for the U.S. Series I Savings Bond at 1.10%, as expected, and the new composite rate at 3.98%, also expected.

This was welcome news, indicating the new administration will maintain consistent support for the savings bond program.

No news release has yet been posted; that should come tomorrow. Bizarrely, just a few minutes after the new rate was posted at 8:30 a.m. on TreasuryDirect, it was taken down and the site was again showing the 3.11% composite rate in effect through April 30.

At 10:10 a.m., the site went live again with the new rate, 3.98%.

In recent years, TreasuryDirect has posted the new rate a day early. Even though the rate change officially takes effect May 1, any purchases today at TreasuryDirect will get the new rates. I confirmed this with a test order this morning:

For the time being, I am going to ignore this flip-flop and assume the fixed rate was set at 1.10%, variable rate at 2.86% and composite rate at 3.98%. And that is what an investor will get with a purchase today through late October.

Update: Here is TreasuryDirect’s news release on the new rates.

What is an I Bond?

The U.S. Series I Savings Bond is a U.S. Treasury security that protects the investor against increases in inflation:

The fixed rate will never change. Purchases through Oct. 31, 2025, will have a fixed rate of 1.10%, down from the previous rate of 1.20% in effect through April.
The inflation-adjusted rate (often called the variable rate) changes each six months to reflect the running rate of inflation. That rate is now set at 2.86%, based on inflation of 1.43% from October 2024 to March 2025. This new rate applies to all I Bonds, no matter when they were issued. (However, the effective start date of the new interest rate will vary depending on the month you bought the I Bond.)
The I Bond’s current composite rate is now 3.98%, annualized, for a full six months for any bond purchased from May to October 2025. That is an increase from 3.11% for I Bonds purchased in April.

The fixed rate. The Treasury has not revealed a method for setting the I Bond’s fixed rate. But over the last decade, it appears to have leaned heavily on this formula for setting the I Bond’s new fixed rate: Apply a ratio of 0.65 to the average 5-year TIPS real yield over the preceding six months. It seems to have held to that formula for this reset:

This was one area that concerned me in the new administration, because changes in policy are always possible. But today’s decision is reassuring that we can expect Treasury to follow predictable policies of the past.

The variable rate. This component of the I Bond’s composite rate wasn’t in doubt. It is based on six months of inflation, in this case 1.43% from October 2024 to March 2025. Double that rate and you get the annualized variable rate, 2.86%.

View historical data on my Inflation and I Bonds page.

Again, it is worth noting that this new variable rate will go into effect for all I Bonds, no matter when they were issued. So if you are holding 0.0% fixed rate I Bonds, you will get 2.86% interest for six months. The starting month of the new rate depends on when you initially purchased the I Bond.

The composite rate. The I Bond’s composite rate isn’t calculated by simply adding the variable and fixed rates. The Treasury uses a formula that adjusts for compounding factors of the fixed rate:

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

So with a fixed rate of 1.10% and inflation rate of 1.43%, the new composite rate calculation looks like this:

0.011 + (0.0286) + (0.0001573) = 0.0397573

Rounding gives you 0.03976. Turning the decimal number to a percentage gives a composite rate of 3.98%. This rate is in effect for six months for I Bonds purchased from May to October 2025. I Bonds purchased in the November 2024 to April 2025 period will eventually get a composite rate of 4.08% for six months.

What this all means

Let’s assume the posting, then pull-down, then re-posting of the new composite rate was an accident and not the result of some Treasury official running down a hall screaming, “We can’t do that!” The fixed rate is the key to an attractive I Bond, and a rate of 1.10% above inflation remains appealing.

The chart shows all the times in history, dating back to September 1998, that the I Bond’s fixed rate was 1.0% or higher. While May 2025 is low on this list, note that only four of these high-level resets happened in the last 17 years.

I Bonds are a unique investment, one of the safest in the world, because they are backed by the U.S. government and provide protection against official U.S. inflation, no matter how high it rises. I Bonds earn tax-deferred interest, are free of state income taxes, can never lose a cent of value and have a flexible maturity date.

Purchases are limited to $10,000 per person per year, unless you add to holdings through gift-box, trusts, or business-owner strategies. So it makes sense to buy nearly every year, but especially when the fixed rate is appealing, as it is today. I consider I Bonds a cash-equivalent investment. Hold them for one year and cash out with a three-month interest penalty, or redeem in five years with no penalty. All the while, there is zero chance your investment will lose value.

Now that we are in the May to October purchase period, you should feel no rush to invest. If you want the I Bond issued in May, wait until late in the month, like May 28, to make the purchase. You earn a full month of interest no matter when you invest.

Another option is to hold tight until mid-October, to see where inflation has been heading and also get a reading on the next fixed rate, to be reset November 1.

I made my I Bond purchases earlier this year, so I am done. Let me know what you are thinking in the comments area below.

Update on EE Bonds

The Treasury set the new fixed rate for EE Bonds at 2.70%, up from the current 2.60%. It also maintained the doubling period of 20 years, meaning that an EE Bond will earn an effective rate of 3.53% if held for 20 years. This compares with a the 20-year Treasury bond, currently yielding 4.66%.

It is hard to make a case for EE Bonds as a short-term investment (especially because of the three-month interest penalty for redemptions before five years) or long-term holding (because you can do much better with a Treasury bond.)

If short-term interest rates fall dramatically before November (unlikely) the EE Bond could begin to look attractive. Otherwise, this savings bond is a non-factor.

• 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

* * *

Follow Tipswatch on X (Twitter) 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 Cash alternatives, I Bond, Inflation, Retirement, Savings Bond, TreasuryDirect | 43 Comments

Countdown to the I Bond’s rate reset

Posted on April 27, 2025 by Tipswatch

April 30 update: I Bond gets a new fixed rate of 1.10%, composite rate of 3.98%

By David Enna, Tipswatch.com

Sometime on Wednesday, April 30, the Treasury is likely to unveil its new fixed, inflation-adjusted and composite interest rates for the U.S. Series I Savings Bond. In the past, using reliable analysis methods I could tell you:

The new inflation-adjusted rate will be 2.86%, up from the current 1.90%.
The fixed rate will be 1.10%, down from the current 1.20%.
The composite rate, which combines the fixed and variable rates according to a set formula, will be 3.98%, up from the current 3.11%.

I think these will be the most likely results for I Bonds purchased from May to October 2025. In fact, I am fairly confident these will be the results, but not 100% confident. There are too many uncertainties in Washington these days for certainty.

Inflation-adjusted rate

Of these three, the inflation-adjusted variable rate of 2.86% is a certainty. It is based on six months of inflation from October 2024 to March 2025, which ran at 1.43%. That rate is doubled to reach the variable rate of 2.86%.

The fixed rate

The Treasury has no announced formula for setting the I Bond’s fixed rate, meaning there is no calculation required by law or regulation enforcing the process. It is up to a decision by Treasury officials. However, I Bond watchers have settled on a forecasting tool that seems to work: Apply a ratio of 0.65 to the average 5-year TIPS real yield over the preceding six months. This formula has worked without fail at least since 2017.

On Friday I updated my 5-year real yield data from the date of the last reset on November 1, 2024, to the close of April, 25, 2025. The data predict the I Bond’s fixed rate will fall to 1.10% at the May 1 reset:

The I Bond’s fixed rate is always set to the one-tenth decimal point and that means the result of the 0.65 ratio calculation has to be rounded, which results in a projection of 1.10%. This has been the running result for more than a month and won’t change in the few days before the reset.

However, there is no way to be sure what formula, if any, the Treasury will use to set the new fixed rate. I think the result will be 1.10%, but this is not certain. This week’s reset could jumble everything. I hope that won’t happen.

The composite rate

The I Bond’s composite rate isn’t calculated by simply adding the variable and fixed rates. The Treasury uses a formula that adjusts for compounding factors of the fixed rate:

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

So if my prediction of a fixed rate of 1.10% and inflation rate of 1.43% are correct, the new composite rate calculation will look like this:

0.011 + (0.0286) + (0.0001573) = 0.0397573

Rounding gives you 0.03976. Turning the decimal number to a percentage gives a composite rate of 3.98%.

I believe this will be the result of the May 1 reset, but I cannot be 100% certain. The U.S. Treasury is currently undergoing an overhaul, including cuts to employees in the Bureau of Fiscal Services, which oversees the savings bond program. From an April 10 article on Govexec.com:

The Treasury Department has begun slashing some offices as part of President Trump’s efforts to reduce the federal workforce, adding several divisions of the Bureau of Fiscal Service to the cut list.

The department is outsourcing the work at the bureau’s Servicing of Savings Bonds, Debt Cross-Servicing Program and Paper Check Printing and Ancillary Services offices. The exact number of employees impacted was not immediately clear but multiple employees familiar with the matter expected it to be hundreds.

An investment quandary

There is still time — but urgently short — to buy an April 2025 I Bond with a fixed rate of 1.20% and a composite rate of 3.11% for six months, before transitioning to a composite rate of 4.08% for the next six months. A purchase in May is likely to earn 3.98% for the first six months, and then an uncertain rate for the next six months.

A higher fixed rate is always a positive, but in this case 10 basis points doesn’t make a huge difference, especially since buying in May gets you a higher starting variable rate. I consider this decision a toss-up, as I wrote in my ‘I Bond Buying Season‘ article.

To purchase an April 2025 I Bond, I highly recommend placing your order on Monday, April 28, to give it time to clear the Treasury process. Purchases on April 29 will also likely be successful, but a purchase on April 30 will be getting the May issue with new rates.

Update: To demonstrate this, on the morning of April 30 I entered a test I Bond order for purchase on April 30 and this is the result:

Purchasing in April results in the most certain result for the investor: A permanent fixed rate of 1.20% and a composite rate of 3.11% for six months and then 4.08% for six months.

If you decide to wait until May, I suggest waiting until late in the month, like around May 28, to make the purchase, since you will earn a full month of interest no matter the date you purchase.

Wait until October?

Once you enter the May to October buying period, you are assured of getting that rate for a full six months, so delaying a purchase until October is fine. Why do that? Because we are seeing high volatility in Treasury yields and could potentially experience a combination of higher inflation, higher budget deficits, a looming debt-limit crisis … and on and on.

Interest rates could fall by October, but that won’t affect your I Bond purchase. The new composite rate will stay in effect until October 30.
Or interest rates could soar higher, and then a November purchase may look more appealing, because the fixed rate could rise.
Or … nothing much will happen to interest rates and you could simply buy in October.

The risks of waiting

The Treasury this week could decide on an oddball, below-expectations fixed rate of 0.50%, with nothing to say about why. (It never explains these decisions.) That is very unlikely to happen, but it could happen.

Or, Treasury could eliminate new purchases of savings bonds entirely, as it did last year with paper I Bonds and payroll-deduction purchases. Again, this is very unlikely.

If things happen as we expect, with the fixed rate set at 1.10%, waiting is a fine move. But there is an air of uncertainty … which will be cleared away on April 30 — or possibly May 1 if Treasury reverts to its old announcement policy.

Of course, I plan to post the rate news on Wednesday (or possibly Thursday) as soon as I get it. The Treasury doesn’t follow a specific schedule for this. It may post the new rates Wednesday morning (because purchases on Wednesday will get the new May rate) but it may not update informational pages until Thursday.

FYI: I focused this article on future rates and didn’t attempt to explain the investing purposes of I Bonds or their intricacies. You can find a lot of that information in these links:

• April 11: Welcome to the I Bond ‘buying season’

• April 3: My I Bond fixed-rate projection just fell to 1.10%

• 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

* * *

Follow Tipswatch on X (Twitter) 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 | Tagged investing, personal-finance, Treasury investments | 26 Comments

5-year TIPS auction gets real yield of 1.702% to apparently weak demand

Posted on April 17, 2025 by Tipswatch

By David Enna, Tipswatch.com

The Treasury’s auction of a new 5-year TIPS, CUSIP 91282CNB3, was a hard one to predict. Real yields have been sliding all over the place in the last week.

You might have seen real yield predictions as low as 1.53%, where the most recent 5-year TIPS was trading this morning. Or as high as 1.62%, the Treasury’s estimate at market close Wednesday. I expected a yield a bit higher than that.

The end result was a real yield of 1.702%, which I would consider a nice result for investors. The “when-issued” yield prediction, revealed just before the auction’s close, was 1.68%. The bid-to-cover ratio was a low-to-middling 2.28. All of this indicates weak investor demand for this auction.

In my preview article, I noted that the Treasury’s 5-year real yield estimate closed at 1.82% on Friday. But I expected volatility this week. And so it goes.

Here is the trend in the 5-year real yield over the last two years. The chart closes with the yield estimate on Tuesday. Note the higher auction result:

Pricing

The auction set the coupon rate for CUSIP 91282CNB3 at 1.625%, same as the October auction of a new 5-year TIPS, issued just days before the November presidential election. That auction got a real yield of 1.670%, lower than today’s result.

Because the coupon rate for this new TIPS was below the real yield of 1.702%, buyers got it at a discounted price of 99.634784. In addition, it will carry an inflation index of 1.00222 on the settlement date of April 30. With that information, we can calculate the exact cost of $10,000 par value at this auction:

Par value: $10,000
Principal purchased as of April 30: $10, 022.20
Cost of investment: $10, 022.20 x 0.99634784 = $9,985.60
+ accrued interest of $6.67

In summary, an investor buying $10,000 par value at this auction paid $9,985.60 and will receive $10,022.20 in principal on the settlement date of April 30.

Inflation breakeven rate

With the 5-year Treasury note trading with a nominal yield of 3.93% at the auction’s close, this TIPS gets a 5-year inflation breakeven rate of 2.23%, a rather low number given our uncertain inflation future. This partly reflects weak demand at this auction, with the real yield rising while the 5-year nominal yield was stable this morning.

Here is the trend in the 5-year inflation breakeven rate over the last 2 years, showing the strong dip in inflation expectations since February:

Thoughts

I knew this 5-year TIPS auction was going to be hard to predict — this is the case with all 5-year TIPS auctions. The October new issue tends to get a real yield lower than “market,” and the April auction in turn tends to get a higher real yield than expected. The reason is the way the non-seasonal inflation affects the final months to maturity of the April issue. Investors expect some deflationary months in the October to December quarter and want a higher real yield as compensation.

So today’s real yield of 1.702% looks good for investors, in my opinion. I was expecting something more in the 1.65% to 1.68% range. It could be that the holiday week and the early auction time contributed to weak demand, resulting in a higher yield.

This TIPS will be reopened at auction on June 17 and then another new 5-year TIPS will be auctioned in October. Here is a history of 4- to 5-year TIPS auctions over the last five years, showing that we’ve come a long way from the -1.685% real yield of the October 2021 auction:

• Now is an ideal time to build a TIPS ladder

• 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

* * *

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

Posted in Federal Reserve, Inflation, Investing in TIPS, TreasuryDirect | Tagged economy, finance, inflation, investing, personal-finance | 21 Comments

5-year TIPS auction presents a dilemma

Posted on April 13, 2025 by Tipswatch

You can find better real yields by stretching out the maturity date, just a bit.

By David Enna, Tipswatch.com

Important note, April 16: Treasury posted an amended announcement for this Thursday auction, moving up the closing times (probably because of the holiday week):

If you are planning on participating, note the earlier times. If you are buying through a brokerage, I’d recommend placing the purchase order Wednesday evening.

————————————————-

The U.S. Treasury market experienced a disturbing rout last week, with both nominal and real yields soaring on longer-term issues.

And, in fact, the rout hit Treasury Inflation-Protected Securities harder than it did nominal notes and bonds, as noted in a Bloomberg article over the weekend:

Inflation-linked bonds (TIPS) have been the biggest losers in the recent Treasury market selloff, with yields rising more than those on regular Treasury bonds. … The TIPS market is smaller and more prone to dislocation from fundamentals, and a mismatch between supply and demand has exacerbated the current episode.

The article ended with a lovely quote from Michael Pond, head of global inflation market strategy at Barclays Capital: “The TIPS market has a tendency to break.”

Also read: The Treasury market seems to be crumbling. Why?

While that sounds a bit scary, the rout has actually opened nice investment opportunities for buyers of medium- to long-term TIPS. Yields have increased about 40 basis points for 7- to 30- year TIPS since April 1, and those maturities now have real yields solidly above 2%.

Here’s a look at the TIPS yield spectrum over the last two years:

Note that the yield spectrum was tightly bunched over much of the last two years, but has widened dramatically in 2025. Although 5-year real yields have been rising, they remain well below the yields of 10- and 30-year TIPS. The 5-year real yield closed Friday at 1.82%, versus the 10-year at 2.28% and 30-year at 2.68%.

But keep this in mind: In chaotic April 3 trading after “Liberation Day” the 5-year TIPS real yield dropped as low as 1.12% midday, and closed that day at 1.25%. It has since increased 57 basis points. So when (or if) things settle down, where will it be?

Monday evening update: The Treasury’s estimate of the 5-year real yield dropped to 1.67% as of Monday’s close. That is down 16 basis points from Friday’s close.

5-year TIPS auction

That’s the current situation as of Friday’s close. But you can expect more volatility this week, leading up to Thursday’s offering of $25 billion in a new 5-year TIPS, CUSIP 91282CNB3. This will be the largest 5-year TIPS offering in history, up from $23 billion last April. The coupon rate and real yield to maturity will be set by the auction results.

Definition: The “real yield” of a TIPS is its yield above or below official future U.S. inflation, over the term of the TIPS. So a real yield of 1.82% means an investment in this TIPS would provide a return that exceeds U.S. inflation by 1.82% for 5 years.

You can get an idea of the potential auction yield by 1) looking at the Treasury’s Yields Curve page, which updates at the close of each market day, or 2) looking at Bloomberg’s U.S. Yields page, which updates in real time for secondary market trading of the most recent TIPS for each term.

Saturday, Treasury was estimating a real yield of 1.82% (as of Monday, this dropped to 1.67%) and Bloomberg showed a trading yield of 1.73% (dropped to 1.59% Monday). That’s a pretty big spread. But there is a reason: Bloomberg is showing the real yield of the TIPS issued in October 2024. The October issues always have a lower real yield than the April issues. I tried to explain the reasons here.

So most likely the Treasury estimate is going to be a better indicator. Don’t trust what you see on your trading platform. Vanguard on Saturday was showing an “indicative yield” of 1.728% for an auction order, which clearly is based on the October issue’s trading. The real yield should be higher. But a lot could change in the days leading up to Thursday’s auction.

If this TIPS auctions with a real yield around 1.82%, that result would be in the mid-range of 4- to 5-year auctions over the last two years. However, I have to admit I have no idea where real yields will be heading this week.

Here is the trend in the 5-year real yield over the last 15 years:

The chart shows how real yields have fallen off from recent highs, but still remain attractive versus the long-term trend. The 5-year real yield tends to be sensitive to potential interest rate cuts by the Federal Reserve, which could explain why the yields have been a bit suppressed versus the overall TIPS market.

By extending the TIPS maturity out a bit, an investor can find real yields topping 2%. Here are some weekend examples from Vanguard’s trading platform for TIPS maturing from 2032 to 2034:

One advantage of buying on the secondary market is that you can see exactly the real yield and price you will pay at that moment, avoiding the potential volatility leading up to Thursday’s auction.

Inflation breakeven rate

With the 5-year Treasury note closing Friday with a nominal yield of 4.15%, this TIPS currently would have an inflation breakeven rate of 2.33%, close to the result of recent auctions. This means it would outperform the 5-year nominal Treasury if inflation averages more than 2.33% over the next five years. Seems fair. Inflation over the last 5 years, ending in March, has averaged 4.4%.

Here is the trend in the 5-year inflation breakeven rate over the last 15 years, showing a fairly stable trend in the 2.0% to 2.5% range in recent years:

Pricing

This is a new TIPS, so the investment price should end up being close to par value. The inflation index on the settlement date of April 30 will be a minimal 1.00222, meaning investors should pay slightly less than par value, based on a coupon rate set slightly below the auctioned real yield.

The alternatives

A 5-year Treasury note yielding a nominal rate of 4.15% is pretty appealing. But given the uncertainties surrounding inflation, I’d prefer a 5-year TIPS with a real yield around 1.82%.

Best-in-nation 5-year bank CDs are currently yielding about 4.5%, also appealing. That stretches the inflation breakeven rate out to about 2.7%. These are worth considering if you are looking for a guaranteed nominal return over five years.

The Series I Savings Bond currently has a fixed rate of 1.2%, well below the 5-year real yield. If you are looking for a cash-equivalent, tax-deferred investment with rock-solid deflation protection, you should invest in the I Bond. TIPS work better for defined inflation-protected cash flow in future years, in a bond ladder.

Final thoughts

I like the 5-year TIPS because … the term is only 5 years. If you are likely to live that long and can hold to maturity, this is a very safe investment that will outperform inflation. If the real yield ends up around 1.80%, that is fine. But you can do a little better by stretching out the maturity, using the secondary market. So it just depends on your needs.

I won’t be a buyer because I have filled the 2030 rung of my TIPS ladder. Right now I am focusing on the new 10-year TIPS to be issued in January 2026, which seems like a lifetime away.

CUSIP 91282CNB3 will be reopened at auction on June 17 and another new 5-year TIPS will be issued in October.

This TIPS auction closes Thursday at 11:30 a.m. ET, which is earlier than normal because of the holiday week. Non-competitive bids at TreasuryDirect must be placed by 11 a.m. Thursday. If you are putting an order in through a brokerage, make sure to place your order Wednesday or very early Thursday, because brokers will cut off auction orders well before the 11:30 a.m. final deadline.

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

• Now is an ideal time to build a TIPS ladder

• 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

* * *

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

Posted in Bank CDs, Cash alternatives, I Bond, Inflation, Investing in TIPS, TreasuryDirect | Tagged investing, personal-finance, Treasury investments | 57 Comments

Welcome to the I Bond ‘buying season’

Posted on April 11, 2025 by Tipswatch

Buy in April to lock in the 1.2% fixed rate? Or buy in May to start with a higher composite rate?

April 30 update: I Bond gets a new fixed rate of 1.10%, composite rate of 3.98%

By David Enna, Tipswatch.com

Long-time investors in U.S. Series I Savings Bonds know there are a few weeks a year when conditions are ideal for making a decision: Purchase now or purchase later?

With Thursday’s release of the March 2025 inflation report, we have entered one of these “buying seasons,” which will continue through the end of April. But before we get to the details, let’s look at some basics of this investment:

An I Bond is a Treasury security that earns interest based on combining a fixed rate and an inflation-adjusted rate.

The inflation-adjusted rate (often called the variable rate) changes each six months to reflect the running rate of inflation. That annualized rate is currently set at 1.90% and will increase to 2.86% after May 1. All I Bonds will eventually get the 2.86% variable rate, with the start date depending on the original month of purchase.
The fixed rate will never change. So if you bought an I Bond in 2014 with a fixed rate of 0.2%, it will continue to have a 0.2% fixed rate for the life of the bond. Purchases through April 29, 2025, have a permanent fixed rate of 1.2%.
The composite rate is a combination of these two rates, currently 3.11% annualized for a full six months for any bond purchased through April 2025.

The variable rate

Here is where we have certainty. The March CPI report provided the final number needed to set the I Bond’s new variable rate. Inflation ran at 1.43% from October 2024 to March 2025. Double that number and you get the new variable rate, 2.86%, up from the current 1.90%.

The new variable rate, 2.86%, is a big jump from the current rate of 1.90%. It makes an I Bond purchase in May more attractive, but remember that the variable rate changes every six months. All I Bonds, including those purchased in April, will get this new variable rate for six months.

The fixed rate

Here is where we lack certainty, except for one thing: If you purchase an I Bond in April, you will lock in the 1.20% fixed rate for the life of the I Bond, up to 30 years. We don’t know for sure how the Treasury will reset that fixed rate on May 1, which will apply to purchases from May to October.

The Treasury has no announced formula for setting the I Bond’s fixed rate, but I Bond watchers have settled on a forecasting tool that seems to work: Apply a ratio of 0.65 to the average 5-year TIPS real yield over the preceding six months. This formula has worked without fail at least since 2017.

On Friday I updated my 5-year real yield data from the date of the last reset on November 1, 2024, to Thursday’s close. The data predict the I Bond’s fixed rate will fall to 1.10% at the May 1 reset:

The I Bond’s fixed rate is always set to the one-tenth decimal point and that means the result of the 0.65 ratio calculation has to be rounded, which results in a projection of 1.10%. With only 12 market days remaining to the reset, that level is likely to stick.

However … We have a new administration running the Treasury Department at a time of some fairly dramatic employee reductions. There is no way to be sure what formula, if any, the Treasury will use to set the new fixed rate. I think it will be 1.10%, but this is not certain.

The composite rate

If you purchase I Bonds in April, you have one year of certainty: You will earn a composite rate of 3.11% for six months and then 4.08% for six months. Combine the rates and you get to a annual compounded rate of 3.64%. According to Bogleheads genius #Cruncher, a $10,000 investment will grow to $10,364 in one year (ignoring the 3-month interest penalty for redemptions before 5 years.)

Obviously, 3.64% isn’t going to make you wealthy over the next year, but I Bonds are more about protecting wealth than building wealth. An I Bond purchased in April is going to earn 1.2% above official U.S. inflation for as long as you hold it.

Purchasing in May opens a couple of unknown variables: 1) we don’t know for certain what the new fixed rate will be, and 2) we don’t know what will happen with inflation over the next six months. But it is certainly possible that a purchase in May will end up with a higher one-year return than a purchase in April, if inflation continues at a brisk pace.

Keep in mind that the difference between a 1.20% fixed rate and 1.10% (if that is the new fixed rate) is only 10 basis points, which equals just $10 of annual interest on $10,000 of principal. Not life changing.

Conclusion. I have been recommending buying in April (and I completed my purchases for 2025 in March). I’d still recommend April, but this decision is a bit of a toss-up and most likely both April or May purchases will work out well. If you want certainty, buy near the end of April (no later than April 28). If you want to wait it out, then buy in late May or …

What about October?

I Bond purchases are limited to $10,000 per person per year unless you add to your holdings through gift-box, trusts, or business-owner strategies. Some people like to spread I Bond purchases over the year, for example $5,000 in April and then $5,000 in October, or possibly even in November at the next reset.

The next “buying season” will open Oct. 15 with the release of the September inflation report, when we will know the next I Bond variable rate. And what about the fixed rate? I have been saying I know with 100% certainty that the November fixed rate will fall into the range of 0.0% to 4.0%. In other words … who knows? We have entered a year of wild financial possibilities.

One important thing to remember is that the November rate decision will be available for purchase in January 2026 when the purchase cap resets.

Are I Bonds that attractive?

With short-term T-bill rates still topping 4%, many investors are shunning I Bonds because of the potentially lower nominal return plus the three-month interest penalty for redemptions within five years. Some thoughts:

We just went through a phase of inflation hitting 40-year highs, and higher prices could be returning in 2025 as we enter a turbulent era. Inflation protection, for part of your portfolio, looks like a wise choice.
Eventually, the Federal Reserve would like to resume cutting short-term interest rates and then the T-bill returns will begin falling. But, yes, the future of rate cuts is unclear. T-bills remain attractive.
I Bonds, if held for 5 years, create an inflation-protected store of cash you can use for future needs, with no penalty for redemption except for federal taxes on the interest.

Is this a short-term investment? I Bonds aren’t a good choice for money you will need in the next one or two years. You can get a 1-year T-bill paying about 3.9%. That nominal yield will beat the return of an I Bond after the three-month interest penalty is applied. I Bonds are best viewed as a longer-term, cash-equivalent investment.

Thoughts

I am a long-time advocate for investing in I Bonds, which create a tax-deferred, totally safe, inflation-protected investment with a flexible maturity date. If inflation heats up again as it did in 2022, you will sleep better at night with a treasure chest of I Bonds.

Again, this investment is not designed to make you rich. It is designed to protect a portion of your nest egg against inflation. April or May? It may not matter much, but I still stand behind I Bonds as an investment in 2025.

• 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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