Key takeaways
- I-bond rates are adjusted twice a year based on six months of inflation data. Today’s Consumer Price Index (CPI) report allows us to project what the Treasury will announce next week.
- With inflation rising, the rate of the next I bond will increase increase by about a quarter point—up to 4.42% for some bondholders.
- Some I bondholders will receive the boost on November 1, while others will see it between December 1 and April 1, depending on the bond’s issuance date.
Now we can predict the rate of the next I bond: this is what is changing
Inflation is often bad news for the wallet, but for I-bond holders, there is a silver lining. The CPI published today shows that prices rose 3.0% over the past yearcompared to a rate of 2.4% in March. Because I-bond yields are directly tied to inflation, that upward trend means a larger payment will be on the way when the Treasury updates I-bond rates on Nov. 1.
The yield paid by I bonds is recalibrated twice a year using inflation data from the previous six months. With today’s CPI report in hand, we can now estimate what the new rate will be for existing bonds, and it’s ready to move. about a quarter of a percentage point higher.
Here’s a quick refresher on how each I-bond rate is calculated. I-bond yields consist of two parts: a fixed rate, which is locked in for the life of your bond (up to 30 years), and a variable inflation rate, which changes twice a year (on May 1 and November 1) based on the CPI. Add the two together and you get the compound rate: the return your bond earns over the next six months.
Below, we’ve done the math for all I bonds issued since November 2021, so you can see how your own rate will change once the new adjustment takes effect.
Why this is important to you
Higher inflation isn’t good for most savers, but it does mean a slightly better return for I-bond holders. The latest CPI data confirms that your interest rate for the next six months will rise by about a quarter of a percentage point.
Advice
For future bond purchases IWe won’t know the fixed rate component until the Treasury makes its announcement on November 1. We know that it will have the same 3.12% inflation component as the existing bonds, but the Treasury does not publish its formula for determining the fixed component of the new I bonds.
When will your I bond rate adjust?
Please note that while the Treasury will announce these new rates on November 1, the month the new rate will begin for you is based on the month your bond was issued I. Only people with I bonds purchased in May or November (of any year) will get the new rate listed above on November 1st. For other issue dates, the start of the new rate will be delayed according to this schedule.
Advice
Have I purchased bonds before November 2021? Each semiannual rate for all bond issuance dates dating back to 1998 can be found in the U.S. Treasury Bond Rate Schedule I.
Are you considering a new I bond? Move fast before the rate resets
According to estimates by some industry experts, the fixed rate component of I bonds issued on or after Nov. 1 will almost certainly be lower than the most recent fixed rate of 1.10%, perhaps as low as 0.90%. That means that if you are considering buying new I bonds soon, you are Better buy before November 1. Ideally, you’ll want to make your purchase at Treasury Direct by October 28 or 29 to allow time for the bond to be issued by October 31.
