I Bonds Rate: What It Is, How It Works, and Where to Buy

A Series I bonds rate is an interest-bearing U.S. government savings bond that offers both a fixed interest rate and a variable inflation rate, which is adjusted semiannually. Designed to provide investors with a return while safeguarding against inflation, Series I bonds offer a combination of growth and protection.

While most Series I bonds are electronically issued, there is also an option to acquire paper certificates with a minimum investment of $50, which can be conveniently done using your income tax refund., according to Treasury Direct.


  • A Series I bond refers to an interest-bearing U.S. government savings bond that is not traded in the market. This financial instrument encapsulates the essence of reliability and growth provided by the government to its valued investors.
  • Invest can reap the benefits of Series I bonds, gaining both a return and protection against inflation that safeguards their purchasing power. This kind of investment is regarded as low-risk, offering a compelling choice for those seeking stability and growth.
  • The bonds cannot be bought or sold in the secondary markets.
  • Series I bonds offer a steady interest rate throughout their lifespan, coupled with a flexible inflation rate that resets biannually in May and November.
  • The initial maturity of these bonds is 20 years, which can be extended for an additional 10 years, bringing the total timeframe to 30 years.

How Do I Bonds Work?

I bonds are issued with a fixed interest rate that remains consistent for up to 30 years. Additionally, they come with a variable inflation rate, which is adjusted every May and November. This unique combination provides bondholders with protection against the impact of inflation, ensuring their investment remains secure and valuable over time.

Understanding Series I Bonds

Series I bonds are a valuable component of the U.S. Treasury savings bond program, providing investors with a low-risk investment option. These bonds, while not available in secondary markets, deliver two types of interest: a fixed interest rate throughout the bond’s lifespan and an inflation rate adjusted biannually in May and November. The adjustment is based on changes in the non-seasonally adjusted consumer price index for all urban consumers (CPI-U).

i bonds
i bonds

The fixed-rate portion of the Series I bond is determined by the Secretary of the Treasury and announced every May and November on the first business day. This fixed rate remains unchanged throughout the bond’s lifespan and is applied to all Series I bonds issued in the following six months. Additionally, the interest on these bonds is compounded semiannually.

Similar to the fixed interest rate, the inflation rate is disclosed biannually in May and November. It is calculated based on variations in the Consumer Price Index (CPI), which serves as a measure of inflation in the U.S. economy. The adjustment in the inflation rate is then applied to the bond every six months starting from its issuance date.

How to Calculate Series I Bonds

The actual rate on the bond, known as the composite rate, is calculated by combining the fixed and inflation rates. The inflation rate has a clear impact on the fixed rate set for bonds. However, it’s important to note that the Treasury has set a minimum floor of zero for the interest rate on Series I bonds. If the inflation rate is so negative that it would exceed the fixed rate, the composite rate will be set to zero. The formula for calculating the composite rate is as follows:

Composite rate = fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)

To illustrate, consider a fixed rate of 0.30% and a semiannual inflation of -2.30%. In this case, the composite rate on the bond will be calculated as follows:

  • = 0.003 + (2 x -0.023) + (0.003 x -0.023)
  • = 0.003 – 0.046 – 0.000069
  • = -0.04307, or -4.31%.

Due to the negative nature of the situation, the composite ratio will be adjusted to 0%.

Special Considerations

Series I bonds are deemed as low-risk investments as they are fully backed by the U.S. government with a guaranteed redemption value that cannot depreciate. Nevertheless, this safety feature comes at a cost – the return is relatively modest, akin to that of a high-interest savings account or a certificate of deposit (CD). Conversely, corporate and municipal bonds carry a heightened level of risk, but in return, offer potentially higher returns.

Series I bonds offer flexible purchase options, allowing investors to buy any amount within the minimum and maximum thresholds. The minimum investment is set at $25, while the maximum annual purchase per Social Security number is capped at $10,000. These bonds can be held for a duration ranging from one to thirty years. However, if sold within the first five years, the holder forfeits the interest accrued in the last three months.

Series I Bonds and Interest Income

Interest income from Series I bonds is subject to federal taxation, but exempt from state and local taxes. The Series I bond, classified as a zero-coupon bond, does not pay interest during its lifespan. Rather, the interest is reinvested into the bond, earning interest on itself. Bondholders have the liberty to choose between two taxation methods—the cash method or the accrual method.

Under the cash method, taxes are only applied when the bonds are redeemed. This means that if a taxpayer holds a bond for seven years before selling it, they will only be taxed at the time of sale. On the contrary, when using the accrual method, taxes on the imputed interest earned are applied each year.

Occasionally, the income generated from Series I bonds may be exempt from federal taxes if it is utilized for higher educational purposes. When an I bond is sold and the proceeds are directed towards qualified expenses at an eligible educational institution within the same calendar year, the interest earned remains tax-free at the federal level.

Where Can I Buy Series I Savings Bonds?

Online purchases of U.S. savings bonds, including Series I bonds, can only be made through the U.S. Treasury using the TreasuryDirect website. Additionally, you have the option to utilize your federal tax refund for the acquisition of Series I bonds.

Are I bonds a good investment?

I bonds are secure investments that offer a guaranteed return and safeguard against inflation. These bonds comprise a fixed rate and an inflation-adjusted rate, which together form the composite rate of return. Notably, during periods of market turbulence, I bonds provide reassurance as they are backed by the U.S. government.

I bonds rate

I bonds accrue interest until either the bond is cashed in or it reaches 30 years of age.

From May 2023 to October 2023, the composite rate for I bonds stands at 4.30%.

I bonds earn a combined rate of interest

the interest on I bonds is a combination of

  • a fixed rate
  • a inflation rate

1. Fixed-rate

When you purchase a bond, you are aware of the predetermined interest rate that will remain fixed throughout the bond’s duration. This fixed rate is unalterable and ensures a stable return on your investment.

On May 1st and November 1st, we unveil the set rate, which is subsequently applicable to all the I bonds we release in the following six months. This practice ensures consistency and transparency in our offerings.

The fixed rate is an annual rate.

2. Inflation rate

The inflation rate can, and usually does, change every 6 months.

On May 1 and November 1, we established the inflation rate. This rate is determined by analyzing the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U), which encompasses all items, including food and energy. By considering various factors and ensuring readability, we ensure an accurate representation of inflation.

Combined rate

The interest rate for an I bond is determined by both a fixed rate and an inflation rate. This combined rate has the potential to change every 6 months, providing flexibility for investors.

I bonds protect you from inflation because when inflation increases, the combined rate increases.

Inflation has the capability to fluctuate in either direction, resulting in the possibility of deflation, which is the opposite of inflation. Deflation has the potential to push the combined rate below the fixed rate, as long as the fixed rate is not zero. However, it is crucial to prevent the combined rate from dipping below zero, even if the inflation rate is extremely negative. Our intervention ensures that the rate never falls below zero.

The combined rate is sometimes called the “composite rate” or the “earnings rate.”


Leave a Reply

Your email address will not be published. Required fields are marked *

6 Best Personal Loan Providers in USA in 2023