How Often Do I Bond Rates Change?

Series I Savings Bonds, or I bonds, are a type of savings bond issued by the U.S. Department of the Treasury. They protect savings from inflation. They are generally considered a low-risk investment because they are backed by the full faith and credit of the United States government. Individuals often find I bonds appealing for their principal preservation and inflation-adjusted returns.

Frequency of Rate Adjustments

I bond rates are adjusted twice annually. New rates become effective on May 1 and November 1 each year. The rate an I bond receives at the time of purchase applies for the initial six months of its holding period. After this initial period, the bond’s rate adjusts to the new rate applicable to that specific bond series. This semi-annual adjustment ensures that the bond’s earnings keep pace with inflation.

Understanding the I Bond Rate Components

The composite interest rate of an I bond has two elements: a fixed rate and a variable inflation rate. The fixed rate is determined by the Treasury and remains constant for the entire 30-year life of the bond once it is issued. This fixed rate is also announced on May 1 and November 1, applying to all I bonds issued during the subsequent six months.

Conversely, the variable inflation rate changes every six months, directly correlating with fluctuations in the Consumer Price Index for All Urban Consumers (CPI-U). This rate is calculated based on the six-month change in the non-seasonally adjusted CPI-U. For instance, the November rate uses CPI-U data from March to September, while the May rate uses data from September to March.

Factors Influencing Rate Determinations

The Treasury sets the fixed rate, influenced by broader market interest rates, such as Treasury yields, the overall economic outlook, and investor demand for I bonds. This discretionary rate is adjusted to maintain the competitiveness and attractiveness of I bonds in the market. If market yields rise, the fixed rate may increase to keep I bonds appealing compared to other investment options like certificates of deposit.

The variable inflation rate, however, is directly tied to the CPI-U, a comprehensive measure of consumer prices. Changes in the cost of goods and services, including energy prices, food costs, housing expenses, and other consumer items, directly impact the CPI-U and, consequently, the I bond’s inflation rate. It is important to note that this variable rate reflects past inflation, as measured by historical CPI-U data, rather than anticipating future inflationary trends. The CPI-U covers a broad spectrum of expenses for urban consumers, reflecting price changes across various categories such as transportation, medical care, and recreation.

Finding Current and Historical Rates

To obtain current and historical I bond rates, visit TreasuryDirect.gov, the U.S. Department of the Treasury’s website. The latest rates for newly issued I bonds are displayed on the TreasuryDirect website. This platform also provides extensive historical rate data, allowing individuals to review how rates have evolved over time. Accessing this information on TreasuryDirect.gov is important for both prospective buyers and current holders to understand their bond’s earnings and make informed financial decisions.