The Treasury today announced that the fixed rate for I-Bonds for the next six months is .30%. Combined with the inflation component of 3.06%, it brings the total I-Bond rate for the next six months to 3.36%.
I-Bonds rates are comprised of two components: a fixed rate that is determined by a Treasury formula, and the inflation rate derived from the CPI. Each November and May, the inflation component of the I-Bond rate resets based on the last six month's inflation data. The fixed component remains the same for the life of the bond. That means if you purchase an I-Bond in the next six months, the fixed component will always remain at .3%. Historically speaking, that the fixed rate has been quite low over the last year. On May 1, 2009, the Treasury reset the fixed rate at 0.10% for bonds purchased through October 30, 2009 (down from 0.7% in the previous six months, but up from a zero fixed rate component a year ago; in the two years previously, it had run between 1.2% and 1.4%).
The rate of 3.36% is less than the 5 best 5-year CD rate but is competitive and does buy some flexibility. If you feel that inflation is going to increase over the next five years, then your eventual APY will be much higher than 3.06%, since the increase in CPI will filter through to the I-Bond rate.
Investors are limited to $20,000 per year in I-Bond purchases so they are not a place to quickly park a large amount of cash.
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