Series I bonds are ‘still a good deal’ despite an expected falling rate in May, experts say

2024-04-17 20:17:00+00:00 - Scroll down for original article

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Jetcityimage | Istock | Getty Images How the I bond rate works The U.S. Department of the Treasury adjusts I bond rates every May and November. That yield changes based on a variable and fixed portion. The Treasury adjusts the variable part every six months based on the consumer price index, which is a key measure of inflation. The agency can change the fixed portion or keep it the same. The fixed portion of the I bond rate stays the same for investors after purchase. The variable rate portion resets every six months starting on the investor's I bond purchase date, not when the Treasury Department announces rate adjustments. You can find each rate by purchase date here. Currently, the variable rate is 3.94% and the fixed rate is 1.3%, for a combined rounded yield of 5.27% for I bonds purchased between Nov. 1 and April 30. The 1.3% fixed rate "makes it very attractive" for investors who want to preserve purchasing power long term, according to Tumin. How the fixed rate could change Since the variable rate for I bonds is based on six months of inflation data, experts agree it will fall from 3.94% to 2.96% in May. The fixed portion is harder to predict because the Treasury does not disclose its formula for changes. David Enna, founder of Tipswatch.com, a website that tracks Treasury inflation-protected securities, or TIPS, and I bond rates, expects the fixed rate will be 1.2% or 1.3% in May. But "1.4% is not out of the question," he said. Enna looks at a half-year average of real yields for 5- and 10-year TIPS to predict fixed rate changes. The real yield reflects how much TIPS investors earn yearly above inflation until maturity. A possible fixed rate change from 1.3% to 1.4% "isn't enough to make a huge difference," but investors always prefer the higher rate, he added. watch now