Broker Check

Series I Bonds Part 2

December 02, 2022

Series I Bonds are comprised of two different components: a fixed rate and an inflation rate.  The fixed rate is the rate you will receive when you buy the bond and will never change.  The inflation rate will adjust up or down with changes in inflation every six months.

Just six months ago Series I Bonds were yielding an annualized rate of over 9%, creating a rush of investors looking to take advantage of the then attractive rates.  In addition, for those bonds issued during that time the fixed rate was 0.00%, therefore 100% of the interest was attributed to the inflation rate component of the overall yield.

Newly issued Series I Bonds as of November 1, 2022, through April 30, 2023, have fallen to an annualized rate of 6.89%, a rate nearly 3% lower than those issued in May 2022.  The fixed interest component of these new bonds also increased from 0.00% to 0.40%, the first increase from 0.00% since November 2019.  It is important to keep in mind that the annualized rates that are presented assume the inflation component will remain the same for two 6-month periods, something that may not occur if inflation subsides.  As always, taking a big picture approach and exploring all alternative options when making investment decisions is advised.