May-October I Bond Rate
The final inflation numbers are in, and the new I-Bonds rate for purchases May through October is expected to have a variable rate of 3.38%. There’s also likely to be a fixed rate as well, perhaps around .70%. That would bring us a total annualized interest rate of 4.08%. You’ll get that rate for 6 months.
For comparison, the current rate for purchases until the end of April is 6.89% which is comprised of 6.48% variable rate + .40% fixed rate.
If/When To Buy
Each year you can buy up to $10,000 in I Bonds. And so everyone will have to decide whether they want to buy now in April, wait for the May rate, or not buy at all.
The advantage to hold off buying until May 1st is that you are likely to get a higher fixed rate, perhaps it will be .70% instead of the current .40%. And so if you plan on holding the I Bonds for longer than 5 years it could make sense to buy in May. However, someone thinking more short term will probably do better buying now to lock in the higher 6.89% rate for the first six months.
Perhaps a better question is whether to buy at all. Given that it’s easy enough to get around 5% or more with a regular high-yield savings account or CD, the I Bonds return isn’t necessarily better. There is a state and local tax savings element to consider, however.
Final Thoughts
In the end, I don’t really see a scenario where buying I Bonds right now is a big win: someone who wants I Bonds as part of a long term investment strategy will hold off buying until May 1st. Someone who is looking for a short term play might skip buying altogether.
I can still see buying in April as an option for someone in a city and state with high taxes. It’s also not a bad option for someone who finds it easier to buy additional I Bonds rather than opening up a relationship with a new bank to get a high rated CD.
Buying I Bonds also gives you the option of keeping it longer term should interest rates drop and inflation rates remain high.
For those new to I Bonds, please read some of our previous post:
U.S. Treasury I Bonds FAQ (When To Buy $10,000 I Bonds, April or May? And More…)
Gifting US Treasury Bonds To Lock In Current Rates Beyond $10,000 Limit (I Bonds)
Wow! US Treasury Bonds Rate Set To 9.62% (I Bonds)
New U.S. Treasury I Bonds 6.49% Rate, FAQ (When To Buy $10,000 I Bonds? 6.48%? 9.62%? And More…)
Treasury Direct Announces 6.89% I Bonds Rate
Pondering US Treasury Series EE Bonds (3.5% APY Return With 20 Year Lockup)