The Current I-Bond Rate of 5.51% Is Mildly Attractive. Here's Why
The current I-bond rate is active through April 2027. It presents an attractive value, if not as attractive as in the recent past.
Though the potential return of U.S. Treasury I-bonds as a long-term investment is no sure thing, Americans have voted for them with their wallets: Billions of dollars of these formerly obscure securities were sold in 2022, including in a last-minute rush at the end of October of that year to capture the 9.62% rate.
The demand was so robust, it knocked the TreasuryDirect website, the only place these bonds can be bought, offline at times.
You can get them just fine today, now that the current I-bond rate is down. The rate is set every six months, typically in May and November, and is made up of two components.
One is based on the government's Consumer Price Index (CPI). Inflation has reignited amid soaring energy prices due to the conflict in the Middle East, which remains a major question for price stability. The rate for I-bonds is down compared to late 2022, but it's rising again. It looks like an attractive prospect in certain lights.
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The other component of the I-bond return is a fixed rate — picked by the Treasury Department without further explanation — that will only apply to bonds issued November 1, 2026, through April 30, 2027.
That fixed rate is, well, fixed — unlike the variable inflation component, whatever the fixed rate was when the bond was issued, you’ll get paid that for as long as you hold the bond (and the term is 30 years).
The current I-bond rate, valid for bonds issued November 1, 2026, through April 30, 2027, is 5.51%. That includes a fixed rate of 1.40%.
To put that in context, the best high-yield savings accounts and the best CD rates are giving returns of about 4% to 5%.
And four-fifths of the way through 2026, the S&P 500 has a year-to-date return of 11%, though the ongoing conflict between the U.S. and Iran is ramping up volatility in the broader market. Investors wanting to protect portfolio returns should consider adding defensive stocks to their holdings.
While a 5.51% I-bond rate might not be as attractive as it was a few years ago, the savings bonds are an attractive option for investors, too, because they offer stability and a guarantee.
What makes the current I-bond rate attractive?
Consider the fixed rate of an I-bond, which is an important component of what an I-bond is. That rate is fixed for as long as you hold the bond, which has a term of 30 years.
If you purchase an I-bond from now to April, you'll always get a return of at least 1.40%. That's not a huge return, but it's a guarantee — and considering that the most popular investment is cash, 1.40% for 30 years is a much higher return than you might get with cash just sitting in a checking account.
Here's an interesting twist, and possibly a consolation prize for anyone who didn't manage to get I-bonds when they were paying a higher yield in 2022: those bonds paid a fixed rate of zero.
While it might seem unimaginable now — particularly with the Federal Reserve hiking interest rates in September because of sticky price pressures, and other rates, including mortgages, at their highest levels in years — zero inflation or deflation could return.
If that happens, those who hold bonds bought from now to April 30 will continue to receive 1.40% interest, while holders of the 9.62% bonds will receive — at least so long as inflation is flat or negative — nothing.
If 0.90% seems laughably low, remember that a few years ago, savers looking to certificates of deposit, savings accounts and other low-risk investments would have been darn happy with that.
What to do with your I-bonds
First, I-bonds must be held for at least a year. There's no way to cash them before this period. Second, if you redeem them before five years from the time they were issued, the last three months of interest is lost.
Another key issue: There's a limit of $10,000 a year on how much you can buy in I-bonds.
In case you haven't noticed, I-bonds are a little complicated. Ultimately, for the moment, they present a reasonably attractive long-term option for safe cash growth.
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