I Bond Investors: Higher Fixed Rate Could Be Coming

Oct. 15, 2018 8:17 AM ET22 Comments
Tipswatch profile picture


  • The I Bond's inflation-adjusted rate will rise slightly on November 1, so there is no pressure to buy before then.
  • But could the I Bond's fixed rate fall from its current 0.3%? The data suggest zero chance, but the Treasury is unpredictable.
  • In fact, the data clearly support an increase in the fixed rate to 0.4% and possibly even 0.5%.

I BondsInvestors in U.S. Series I Savings Bonds have entered the last 'limbo period' of 2018 and it's time to make a decision: Are they going to buy I Bonds this year, or not?

I Bonds are a unique investment -- very safe and very conservative, and yet are followed with passion by some fairly wealthy investors. Why? Because they offer the opportunity to push tax-deferred, inflation-adjusted money into the future, with zero risk.

A quick primer on I Bonds

  • Each I Bond carries a fixed rate that will never change. So if you bought an I Bond in 2013 with a fixed rate of 0.2%, it will continue to have a 0.2% fixed rate for the 30-year life of the bond, or until it is redeemed. The fixed rate is reset on May 1 and November 1 of each year.
  • Each I Bond also has an inflation-adjusted rate, also called the variable rate, that changes each six months to reflect the running rate of inflation. All I Bonds get this variable rate for six months, but when it starts depends on the month when you bought the I Bond.
  • The combination of these two rates creates the I Bond composite rate, which is currently 2.52% for I Bonds purchased through October 31, based on the current variable rate of 2.22% and fixed rate of 0.30%.
  • I Bonds are the most conservative and most safe of all investments. Your principal is 99.9999999% safe and it will never decline. If inflation falls to below zero, the composite rate could fall to zero, but not below zero.
  • I Bonds allow you fantastic flexibility. You can redeem them after one year, costing you three months of interest. Or redeem them after five years and pay no penalty, or just hold them for 30 years and cash out.

This article was written by

Tipswatch profile picture
I am no longer writing for this site. More details. I will continue to post updates at my site, TipsWatch.com.-----David Enna is a long-time journalist based in Charlotte, N.C. A past recipient of two Society of American Business Editors and Writers awards, he has written on real estate and home finance, and was a founding editor of The Charlotte Observer's website. The Tipswatch blog, which launched in April 2011, explores ideas, benefits and cautions about U.S. Series I Bonds and Treasury Inflation-Protected Securities, which David believes are an under-appreciated and under-used investments. David has been investing in TIPS and I Bonds since 1998.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (22)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.