I Bonds: Surprisingly High Interest Rates
Most of us rarely think of buying I Series Bonds from the U.S. Treasury. However, the current interest rate for these bonds has been getting some attention in the news at a whopping 7.12%!
Read an article written by Jeff Levine linked below explaining what you need to know if you are looking for a better return on cash that you will not need for the next year or more. If inflation expectations hold true into May when the rate is reset, these bonds should still provide a better overall return than most bank savings accounts.
From the Levine Article
I Bonds are offered via the Treasury Department and are backed by the U.S. government. You can purchase them through the TreasuryDirect website, with limits of $10,000 annually per person. What makes I Bonds unique is their interest structure, which consists of a combined “Fixed Rate” and “Inflation Rate” that, together, make a “Composite Rate”—the actual rate of interest that an I Bond will earn over a six-month period.
While the current Fixed Rate for newly purchased I Bonds is 0%, the Inflation Rate for I bonds purchased before May 1, 2022, is an annualized 7.12%. This means that the Composite Rate is also an annualized 7.12% for the first six months that the I Bond is held—the highest rate of I Bonds since May 2000. After this time, a new Composite Rate will be determined by any changes to the Fixed and Inflation rates. While I Bonds have a 30-year maturity, they can be redeemed after being held for at least 12 months. Investors who redeem I Bonds between 12 months and five years after issue will forfeit the last three months of interest, but I Bonds held for more than five years can be redeemed at their current value.