The new I Bonds rate for May – October has been announced as 4.30%. That includes two parts. 1) 3.40% variable rate – that will be the rate for six months. 2) .90% fixed rate – that will be for up to 30 years, added on top of whatever variable rate is available at the time.
We wrote over what was being projected a couple of weeks back, and now the actual numbers were released and showing the on Treasury Direct website. The numbers are a bit higher than what was being projected.
Interest rate for November 2022 through April 2023: 6.48% variable rate + .40% fixed = 6.89% total.
Interest rate for May 2023 through October 2023: 3.40%% variable rate + .90% fixed = 4.30%% total.
The Treasury has never released the new rate until the 1st, yet this time they decided to put it out there a bit earlier which is interesting. It’s no longer possible to buy in April since transactions initiated today will apparently finalize in May with the May rate. (If you prefer the new rate due to the higher fixed amount, I’d hold off purchasing until Monday just to be sure that it doesn’t get in on the old rate.)
As far as buying now with the 4.30% rate: as mentioned prior, 4.30% isn’t great since you can get a 12-month CD with around 5% APY from various banks, currently. Still for someone in a high city/state tax bracket it might make sense.
Just remember you’ll lose 3 months of interest if you cash out within 5 years. Ultimately, it mainly makes sense to buy now if you’re thinking longer term. That takes away the 3 month sting, and also helps you lock in the .90% fixed rate for the longer term on top of whatever rate the Treasury if offering then.
Reminder: the 4.30% rate is only for new purchases. Those who purchased previously will only get 3.40% for these six months (along with whatever your fixed rate is, which is zero in many cases). Also remember, the six months of 3.40% for previous purchases don’t necessarily begin on May 1st; it depends when you bought. And don’t forget about the 3 month penalty and time accordingly. For those looking to pull out of I Bonds, check out this article from Tipswatch on when you should pull out. See also this comment.