The U.S. Treasury’s auction offering of $26 billion of a new 5-year Treasury Inflation-Protected Security — CUSIP 91282CPH8 — generated a real yield to maturity of 1.182%, down a whopping 52 basis points from a similar auction in April.
The result looked on target, but demand appeared a bit weak. At the auction’s close, the “when-issued” prediction was for a real yield of 1.17%. The result of 1.182% shows investors were not diving in. However, the bid-to-cover ratio was 2.51, a routine number for this term of TIPS.
Real yields, especially for shorter-maturity TIPS, have been declining as the Federal Reserve rolls out a wave of cuts to short-term interest rates. The next cut could come next week. Here is the trend in the 5-year real yield over the last two years, showing the substantial fall from the October 2023 highs:
Click on image for larger version.
The real yield managed to remain 8 basis points above the current fixed rate of the Series I Savings Bond, which has a fixed rate of 1.10% for purchases through the end of this month. For many investors, the I Bond is a more attractive investment at these rates, given the advantages of tax deferral, flexible maturity, and solid deflation protection.
Pricing
This is a new TIPS, which means the coupon rate was set at 1.125%, to the 1/8th percentage point below the real yield of 1.182%. That resulted in an unadjusted price of 99.726133, a slight discount. In addition, this TIPS will carry an inflation index of 1.00148 on the settlement date of Oct. 31. With that information, we can calculate the exact cost of a $10,000 par-value investment:
Par value: $10,000
Actual principal purchased: $10,000 x 1.00148 = $10,014.80
Cost of investment: $10,014.80 x 0.99726133 = $9,987.37
+ accrued interest of $4.95 (to be returned at first coupon payment)
In summary, an investor paid $9,987.37 for $10,014.80 of principal at the settlement date of Oct. 31. From that point on, the investor will earn accruals to principal matching inflation plus an annual coupon rate of 1.125%, applied to inflation-adjusted principal.
Side note for nerds: This is the first time in the history of the 5-year TIPS, dating back to July 1997, that the coupon rate has been set at 1.125%.
Inflation breakeven rate
At the auction’s close, the nominal 5-year Treasury note was trading at 3.59%, setting up an inflation breakeven rate of 2.41% for this TIPS, a bit higher than recent results. This means CUSIP 91282CPH8 will out-perform the nominal 5-year if inflation averages more than 2.41% over the next five years.
That seems like a pretty even bet, but I’ll note that inflation over the last 5 years, ending in August, has averaged 4.5%. I’d prefer the TIPS until we see evidence that inflation is actually declining.
Here is the trend in the 5-year inflation breakeven rate over the last two years:
Click on image for larger version.
Thoughts
Although the real yield came in 1 basis point higher than the when-issued prediction, this looks like a fairly routine auction with a fair result. The U.S. Treasury’s 5-year real yield estimate closed Wednesday at 1.24%, but a yield that high never seemed likely, as I explained here. I’d say 1.182% was a good result for investors.
Here are auction results for 4- to 5-year TIPS over the last five years:
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.
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.
Auctions for new 5-year Treasury Inflation-Protected Securities happen twice a year, in April and October. Because of the relatively short term, and the different inflationary conditions leading up to each maturity date, the 5-year TIPS auction is hard to predict.
I got caught by this phenomenon in October 2023, when a new 5-year TIPS (CUSIP 91282CJH5) auctioned with a real yield of 2.440%, well below the “market” yield of about 2.55% or higher. I was surprised. But I shouldn’t have been.
I wrote about this in an Oct. 20, 2023, article with the subtitle “There is an explanation for everything, right?” The basic lessons are these: 1) The October TIPS auction will get a real yield less than the apparent market rate, and 2) The April TIPS auction will get a real yield higher than market.
The reason is a bit esoteric: Non-seasonally adjusted inflation has a strong seasonal pattern, generally running higher than headline CPI from January to June and lower from July to December. The closing value of the April TIPS (reflecting inflation through mid-February) is much more likely to be exposed to end-of-the-year deflation, and therefore the April TIPS gets a higher real yield than “market.”
I created a chart last year to prove the point — the April 5-year TIPS gets a higher real yield than the October version:
Here’s another chart that shows how deflationary months are quite common in the last three months of the year, which would reduce the maturing value of an April-issued TIPS:
Click on image for larger version.
What does this all mean?
On Thursday, Treasury will auction $26 billion in a new 5-year TIPS (CUSIP 91282CPH8). That will be the largest auction-size ever for this term, up from $25 billion in April and $24 billion in October 2024.
You can track the real yield of the April TIPS in real time on Bloomberg’s Current Yields page, which shows a Friday closing real yield of 1.23%. The U.S. Treasury also provides a daily estimate of the real yield of a full-term 5-year TIPS, which closed Friday at 1.30%.
Saturday morning, Vanguard’s bond-trading site was showing an “indicative yield” of 1.235% for the upcoming auction, obviously based on current trading in the April TIPS.
Conclusion: All of these indicators are wrong. At this point in time (things will change by Thursday) I’d predict this TIPS would get a real yield of 1.15% or lower. Past results show us the real yield will be lower than the 1.23% “market” created by the April TIPS. In other words, be prepared to be surprised.
Definition: The “real yield to maturity” of a TIPS is its yield above official future U.S. inflation, over the term of the TIPS. So a real yield of 1.15% means an investment in this TIPS would provide a return that exceeds U.S. inflation by 1.15% for 5 years.
Real yields will rise and fall next week in the days leading up to the auction. But it will be interesting to see how close this 5-year TIPS gets to the 1.10% fixed rate on the current Series I Savings Bond, available through the end of this month.
Here is the trend in the 5-year real yield over the last 15 years:
Click on image for larger version.
Side note: Remember that 5-year TIPS auction of Oct. 19, 2023, when the real yield was a “disappointing” 2.440%? Turns out that the auction came within a whisker of the 15-year high real yield of 2.49%, set a few days later.
Pricing
Because this is a new TIPS, the coupon rate will be set to the 1/8th percentage point below the auctioned real yield. That means the TIPS will have an unadjusted price slightly below par value. It will carry a minimal inflation index of 1.00148 on the settlement date of Oct. 31. The end result will be a price slightly below par. In other words, a $10,000 investment in this TIPS should cost very close to $10,000.
Inflation breakeven rate
Using the U.S. Treasury estimates of 1.30% for a five-year TIPS (probably too high) and 3.59% for a 5-year Treasury note (probably accurate) you get an inflation breakeven rate of 2.29%, a bit below recent trends. If you adjust the likely yield to 1.15% the breakeven rate rises to 2.44%, higher than recent trends. My conclusion: Who knows?
Here is the trend in the 5-year inflation breakeven rate over the last 15 years:
Click on image for larger version.
Thoughts
I often note that the 5-year TIPS is most sensitive to the Fed’s short-term rate cuts, and that has proven accurate in 2025. The 5-year real yield has fallen about 67 basis points since January 1, compared to 48 for the 10-year and only 8 for the 30 year.
Is a real yield around 1.15% to 1.20% still attractive for a 5-year TIPS? Yes, but it depends on your investment needs. As the yield approaches the now-current 1.10% fixed rate on the I Bond, the savings bond becomes more attractive, given its tax-deferral, deflation protection and flexible maturity. (The I Bond’s fixed rate is likely to fall to 0.9% at the November 1 reset, but 1.10% is available through the month of October.)
I suspect their won’t be much demand for this auction from small-scale investors. If you are jumping aboard, let me know your thoughts in the comments section.
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 auction results for this term over the last 5 years:
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.
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.
Back on October 22, 2020, a new 5-year Treasury Inflation-Protected Security — CUSIP 91282CAQ4 — auctioned with a depressingly low real yield to maturity of -1.320%, which at the time was the second-lowest real yield ever recorded for a 5-year TIPS at auction.
Think back: Just five years ago, investors were willing to accept a real yield that was guaranteed to under-perform inflation by 1.320% for five years. Seems mind-boggling today. But that was the investment reality in 2020, as the Federal Reserve ramped up bond-buying quantitative easing at the height of the COVID-19 pandemic. At one point, the Fed held more than one-fifth of total TIPS outstanding.
It is therefore amazing that this TIPS ended up being a decent investment, especially if you compare it to a nominal 5-year Treasury note at the time, which was yielding an insanely low 0.37%. That created an inflation breakeven rate of 1.69%. (At the time U.S. inflation was running at 1.2%.)
In my preview article for this auction, I noted the seriously ugly real yield still offered appeal versus the nominal Treasury:
In the current environment of ultra-low interest rates for safe investments, this TIPS should be considered “above average.” Why? Because it provides a hedge against unexpected future inflation. The Federal Reserve has openly committed to forcing annual U.S. inflation higher than 2% a year, for an extended period of time, as long as the labor market remains weak.
I also pointed out that the Series I Savings Bond was a much better investment with a fixed rate of 0.0%, more than 120 basis points higher than the 5-year TIPS:
I Bonds are better than TIPS, across the entire maturity spectrum.
How did this TIPS do?
As it turned out, inflation over the last 5 years averaged 4.5%, well above the auction’s inflation breakeven rate of 1.69%. So CUSIP 91282CAQ4 outperformed the nominal 5-year Treasury by a whopping 2.81% a year. It ended up producing a nominal return of 3.117%, versus the 5-year Treasury note’s 0.37%.
This result continues a five-year string of out-performance of TIPS over nominal Treasurys, thanks to the 40-year-high surge in inflation that peaked in June 2022 at 9.1%. Inflation continues today at 2.9%, well above the expectation of 1.69% in October 2020.
Click on image for larger version. View more data on my TIPS vs Nominals page.
I Bond was the winner
Obviously, an I Bond with a 0.0% fixed rate (which is equivalent to its real yield) is going to out-perform a TIPS with a negative real yield. If you purchased an I Bond in October 2020 with a fixed rate of 0.0%, it will have created a nominal yield of 4.03% through April 2026, about 91 basis points better than the TIPS (Source: Eyebonds.info).
And bond funds?
Vanguard’s Total Bond Fund ETF (BND) has had a total annual return of -0.33% 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%.
Vanguard’s Short-Term TIPS ETF (VTIP) has had a total annual return of 3.71% over the last 5 years, a bit better than CUSIP 91282CAQ4’s performance. It benefits from a shorter duration and counter-acting gains from higher inflation.
The iShares TIPS ETF (TIP), which holds the full range of maturities, has had a total annual return of 1.32% over the last five years, under-performing CUSIP 91282CAQ4.
Moral of the story
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. (Let’s hope we don’t see that again.) And 2) Even a TIPS with a negative real yield can be “relatively” attractive if the inflation breakeven rate is lower than seems likely.
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.
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.
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.
It was inevitable that the trend of lower 5-year real yields would eventually push my I Bond fixed rate protection to 0.90%, down from the current 1.10% for I Bond purchases through this month.
The inevitable became fact on Friday, when the Treasury’s estimate of the 5-year real yield closed at 1.30%.
As I noted in an October 5 posting, the Treasury has no announced formula for setting the I Bond’s fixed rate, which is permanent for the potential 30-year life of the savings bond. 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.
As of Friday’s close, here is the updated forecast:
Friday’s close marked the first day the 0.65 ratio formula has resulted in a rounded fixed rate of 0.90% versus 1.00% earlier in October. The new fixed rate will take effect on November 1 and apply to I Bonds sold between November 2025 and April 2026.
Obviously, the ratio result of 0.9499% is a razor-thin margin (0.95100% would round up to 1.00%) but the trend is clear: The fixed rate is going to be 0.90% at the November reset, if the Treasury continues practices it has used over the last decade. To get back to 1.00%, the average over the next 12 market days would have to be 1.47% or higher, which doesn’t seem likely.
Is there a strategy?
Fill the purchase cap this month. If you are a committed I Bond investor and haven’t yet purchased up to the full $10,000 per person limit this year, I recommend that you do that this month at TreasuryDirect. In its BuyDirect system, you can schedule the purchase for later this month. I recommend setting the date for Oct. 28 or 29, to give some time to complete the process before the rate reset. An I Bond purchased late in a month earns a full month of interest.
Use the gift box to add to your purchases. I am not a “fan” of the gift-box loophole for purchasing I Bonds above the limit, but it is legit and can be used if you have a trusted partner for swapping purchases. I did that last year for two two extra sets at a fixed rate of 1.30%, and had no plans to do it again. However … I am doing it again this month.
For more on the gift-box process, read Harry Sit’s excellent summary, updated in 2023.
My plan is to purchase the I Bond gift-box sets in late October and deliver them in November, before the end of the calendar year. (Gift-box deliveries count against the purchase cap, but only if the recipient has not yet purchased that year. Delivering in 2025 leaves the option open for a traditional purchase in 2026.)
Why use the gift box now? Because it looks likely that the changes are coming to the gift-box program, as I noted in an article last week: “TreasuryDirect email is an omen of coming changes.” I don’t know what’s coming, or when. But something is up.
The logical choice is to buy I Bonds at 1.10% instead of 0.90%. If you were going to make the purchase in January anyway, it makes sense to move it up to this month, if you can swing it financially.
Clarity coming on variable rate
The government shutdown was threatening to send the inflation-reporting process into chaos, but that situation was eased last week when the Trump administration allowed Bureau of Labor Statistics staffers to return to prepare the September inflation report. That report is crucial mainly because it will determine the 2026 Social Security cost-of-living adjustment, which by law must be set by November 1. It also will set a new variable rate for all I Bonds, no matter when they were issued.
We will get the September inflation report at 8:30 a.m. Friday, Oct. 24, just a few days before the Federal Reserve will meet Oct. 28-29 to decide if it will reduce short-term interest rates. The inflation report will set the I Bond’s new variable rate. On the morning of Friday, Oct. 31, we should learn the new fixed and composite rates for I Bonds purchased from November to April.
I haven’t yet seen projections for the September rate of non-seasonally adjusted inflation, but I would expect it to be in a range of 0.20% to 0.40%. Combine that with a fixed rate of 0.90% and you get these results:
0.2% = variable rate of 3.02%, composite rate of 3.93%
0.3% = variable rate of 3.22% composite rate of 4.13%
0.4% = variable rate of 3.42%, composite rate of 4.34%
If the result falls into this range, the new composite rate should be close to or higher than the current rate of 3.98%, even with the fall in the fixed rate to 0.90%. Purchases in October will receive the 3.98% composite rate for a full 6 months, and then transition to the next variable rate, combined with the current fixed rate of 1.10%.
Here are the potential future composite rates for I Bonds purchased in October with the higher fixed rate of 1.10%:
0.2% = variable rate of 3.02%, composite rate of 4.14%
0.3% = variable rate of 3.22% composite rate of 4.34%
0.4% = variable rate of 3.42%, composite rate of 4.54%
Keep in mind that the actual rate of non-seasonally adjusted inflation will be something like 0.25% or 0.34%, so a lot of variations are possible. These numbers are a rough guide.
At this point, the I Bond’s composite rate is competitive with the 13-week T-bill at 4.02%, and will gradually be even more appealing as the Fed cuts short term interest rates into next year. I remind, as always, that the three-month interest penalty for redemptions within five years reduces the I Bond’s advantage as a short-term investment. So think longer term.
I Bonds with a fixed rate of 0.90% will remain an attractive way to store inflation-protected cash for future uses.
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.
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.
Again, a prod to deliver gift-box savings bonds. Quickly.
Series I Savings Bonds are a U.S. Treasury investment.
By David Enna, Tipswatch.com
Savings Bond investors who are holding I Bonds in “gift-box” storage are getting emails from TreasuryDirect this week advising them to deliver the bonds to the intended recipient. Like (hint, hint) now.
I haven’t received the email, because I delivered all our gift-box I Bonds in 2024, also the year they were purchased. But readers have sent me the text:
Dear TreasuryDirect Customer,
Treasury is always looking for ways to enhance your experience. This includes simplifying the gift bond delivery process. Our records show that your account holds undelivered gift bond(s). To best prepare for coming changes, we recommend delivering your gift bond(s). Delivering gift bond(s) enables your recipient to experience the full benefit of your gift.
Promotes Timely Access and Ownership: Maybe you’re waiting for a certain milestone to gift your bond or simply haven’t gotten around to it. Remember, the registered recipient is the sole legal owner of the bond as soon as you purchase it. Delivering the gift bond promptly ensures the smoothest gifting process.
Grows Investments and Financial Awareness: Delivering gift bond(s) to younger recipients can give them a head start on financial literacy. These bonds may also serve as valuable resources for tuition costs or other important life expenses down the road.
This email echoes the rather vague instructions TreasuryDirect sent a year ago, which I wrote about in this post: “Deciphering TreasuryDirect’s mysterious gift-box email.” In that email, Treasury advised: “Please deliver your gift to the recipients account as soon as possible.” Then in early January 2025, TreasuryDirect sent out a survey about the gift-box process, raising more questions. But since then … silence.
The key words of this new email are “coming changes.” That is an explicit signal that changes are coming to at least the gift-box program and possibly in a broader sense to the entire savings bond system.
Plus, we now have an FAQ
The TreasuryDirect email includes a link to frequently asked questions about this gift-box issue. Here are the Qs and As, along with my thoughts:
How do I deliver a gift savings bond?
Visit TreasuryDirect, log into your account, visit the Gift Box tab on your account page, select the bond, and click “deliver.” You will then enter your recipient’s information, including your recipient’s TreasuryDirect account number. Visit the “How to deliver a gift savings bond — TreasuryDirect” page for more information and to view a video tutorial.
Reaction: The video has good step-by-step instructions. Notice that you need the TreasuryDirect account number of the recipient to complete this process. This should be no problem for most people (couples, for example) but could be a sticking point if the recipient is your niece currently living in France.
How is Treasury enhancing the experience of TreasuryDirect customers?
Treasury is always looking to improve your experience. Future enhancements are still being determined, but we will share information as it becomes available.
Reaction: Purposely vague, but a clear indication that changes are coming to the savings bond process. Hint: I would suggest raising the annual per person purchase limit from $10,000 to $20,000 (or higher), which would mostly eliminate the need for gift-box purchases.
I am sure that TreasuryDirect realizes that the gift-box process is heavily used by sophisticated investors looking to expand their inflation-protected holdings in a very safe investment, the I Bond. So why not adjust I Bond sales to reflect that demand?
Is the gift bond program being eliminated?
At this time, the gift bond program is not being eliminated. However, we will share more information as it becomes available.
Reaction: Vague and not conclusive. I read it as “we are considering all options,” but I suspect Treasury has some solid ideas to de-emphasize gift-box purchases.
Is there a deadline for delivering gift bonds?
Delivering gift bonds proactively prepares you for upcoming enhancements and enables your recipient to experience the full benefit of your gift.
Reaction: Again, this is an all-out announcement that changes are coming.
Is delivering my gift bonds mandatory?
You are encouraged to deliver gift bonds now to ensure you are prepared for coming enhancements and so your recipient can experience the full benefit of the gift bond.
Reaction: Last year, I Bond investors were dizzy when TreasuryDirect seemed to ask them to deliver gift-box purchases “as soon as possible.” That was counter to “accepted” beliefs about delivery limits per year.
We all thought a $10,000 delivery would not be allowed in a year when the recipient had reached the purchase cap. Wrong. We thought multiple purchases and immediate deliveries would never be allowed. Wrong. We thought maybe future purchases by the recipient would be limited. Wrong.
New instructions: You are encouraged to deliver gift bonds now. Got it?
What happens if I don’t deliver my gift bond(s)?
Gift bond recipients are the sole legal owners as soon as they are purchased, so holding undelivered gift bonds introduces potential complications.
Reaction: Potential complications? Not under the current gift-box system, but possibly after changes are made. I am not sure what to make of this.
Is there a limit to how many gift bonds I can deliver to their recipient(s)?
You can only deliver one gift bond at a time. There is no limit to the amount a recipient can receive; however, once they have received $10,000, they should not purchase additional savings bonds that year because gift amounts are applied towards the purchase limit.
Reaction: BOOM! There are two very important messages here: 1) You can deliver gift-box purchases one at a time, but as often as you like, which means unlimited deliveries are possible. 2) The gift-box delivery will count toward the recipient’s purchase cap, but only if they have not yet made a standard purchase this year.
In other words: Have the recipient make the standard $10,000 purchase first, then deliver any or all gift-box items to the recipient, one at a time. That’s how I read this and it is also how the process worked last year, surprisingly.
This is an “almost-clear confirmation” of what we have been experiencing.
Can my recipient cash out gift bonds over the annual purchase limit once they’re deposited into their account?
There is no limit to the amount of bonds a recipient can cash out from their TreasuryDirect account, regardless of how the bonds were acquired. Bonds can only be cashed out if it has been at least one year since the bond was purchased.
Reaction: There never was any restriction on the number of bonds any person could redeem, once the bonds are in their account and have passed the one-year deadline. But this clarifies that is true.
Does the recipient have to accept the gift bond for it to be delivered?
The recipient does not have to accept the gift bond for it to be delivered. … Undelivered gifts remain in the purchaser’s gift box, which prevents the intended recipient from benefiting from the gift.
Reaction: A person might logically reject the gift bond if that person wanted to first purchase I Bonds the standard way, before receiving the gift. I would guess that most “trusted partners” would coordinate on the deliveries. Also, if the recipient has not yet opened a TreasuryDirect account, that would delay the process.
What happens to undelivered gift bonds in the account of someone who has died?
A Treasury gift bond belongs to the recipient and is considered the property of the named recipient from the moment it’s purchased. Estate laws vary from state to state — please work with the executor or legal representative if either the gift giver or the recipient is deceased.
Reaction: If you think you could be close to death, deliver those gift I Bonds immediately. No reason to get probate courts involved in this process. I think it is a good idea to reduce TreasuryDirect holdings as you get closer to “lifetime expiration.” Let the T-bills mature, for example. I Bonds in a “with” ownership account with your spouse are probably OK; others may have different advice.
Still having trouble?
If you can’t find the answer to your question, call us at 844-284-2676 from Monday-Friday, 8am-6pm.
Reaction: Before you call, locate your TreasuryDirect account number. I called. The answering phone message immediately confirms that the gift-box email was legitimate. I punched through to get to a Fiscal Services agent.
I told the agent I was a journalist and asked: “Can you tell me what changes are coming to the TreasuryDirect system?” Answer: “I can’t provide information on that at this time.” Question: “But you do know about the changes?” Very long pause. “No.”
I also asked for clarification on the “have recipient purchase first and then deliver unlimited gift-box sets to that person” question. Answer: “That will work but the system may reject the purchase.” Question: “But it will be OK if the deliveries are done one at a time?” Answer: “That is correct.”
Question: “So a person could go in today and buy multiple sets of gift-box I Bonds and then deliver them this year?” Answer: “Yes, but you’d have to wait five days to make the delivery.” (The 5-day rule has always been in effect).
Can I guarantee that this is accurate information? No, but it is exactly in keeping with the FAQ that TreasuryDirect provided, so I believe it is.
Is there a strategy?
I have more or less given up on the gift-box strategy after diving in last year. Now I am warming up to buying one set (in my account and my wife’s) later this month. The reason: I was going to make a 2026 purchase anyway, and the fixed rate is likely to fall from 1.10% to 0.90% at the November 1 reset. I might as well buy a couple months early and lock in the higher fixed rate.
Remember, there are no tax consequences incurred when you deliver or receive a gift I Bond. Taxes on interest earned are only owed at redemption.
Eventually, we are going to learn what TreasuryDirect is planning. I thought that last year also with the prodding email followed up by the survey in January. Maybe we will see changes before then end of 2025.
My suggestion to TreasuryDirect, again, is to raise the savings bond purchase limit to at least $20,000 and eliminate the need for excess gift-box purchases. On the other hand, maybe the gift-box loophole will get severely curtailed.
But maybe something weirder is coming, like privatizing or outsourcing savings bond support and management? Emptying the gift-box rolls would make management of savings bonds much simpler. I doubt this would happen, but who knows?
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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.
Treasury Inflation-Protected Securities 
I did respond to your question for the comment you posted in this article. My answer was: I am not…