[Repost] Treasury Direct Announces 6.89% I Bonds Rate

Update 12/13/22: Reminder – the last chance to buy I Bonds toward your 2022 $10,000 allotment will be on Thursday December 29th. After that, we can begin buying our $10,000 allotment for 2023. (Tangentially, lots of people are reporting that the process for adding a second bank can now be done easily through the online login without the old onerous process of mailing in a form.)

Original Post 11/1/22:

U.S. Treasury Direct officially announced the 6.48% I Bonds rate for November 2022 – April 2023. This was widely reported before the official announcement today.

They also announced a fixed rate of .40% for I Bonds. This means that if you buy I Bonds now you’ll get 6.89% return whereas if you bought last month you’d get only a 6.48% return (when that rate kicks in). The 6.48% rate is called the ‘annualized rate’ which changes twicer per year and the .40% rate is called the ‘fixed rate’ which doesn’t change and gets added on top.

What’s nice about the fixed rate is that it continues for the entire 30-year term of the I Bonds. Someone can buy I Bonds anytime from November 2022 through April 2023 and get an extra .40% return on these I Bonds purchased for the next 30 years. For example, suppose the next I Bonds rate (beginning May 2023) will be 9.50%, you’ll get 9.90%. And suppose the rate after that (beginning November 2023) is 2.00%, you’ll get 2.40%. Etc, etc.

In recent history the fixed rate has always been a big fat zero, until this new announcement. However, some people have older I Bonds from many years back which have a fixed rate, and they’ve been getting their fixed rates added to the high I Bonds returns of late.

Did I make a mistake buying in late October at the 9.62% rate?

Lots of us are wondering whether locking in the 9.62% rate was smart since it means that when the 6.48% rate kicks in we’ll earn .40% less than those who buy in November. This is something we discussed in our I Bond post analyzing the 9.62% and 6.48% rates (at the time, guesses were a fixed rate of either zero or between .1% – .5%).

Indeed, given the .40% fixed rate, someone who will end up holding the I Bonds for 30 years (or perhaps even 10 years or less) might have done better not buying at the 9.62% rate.

However, for those who think it’s likely they’ll cash out the I Bond in a year, or even in 5 years, you were probably better off buying at the old rate due to the front-loaded increased earnings from the 9.62% rate. (I’ll let someone very math inclined crunch the numbers on exactly what the cutoff point is. 🙂 I believe it also depends on future I Bond rates, so not necessarily easy to compute.)

Our Verdict

Regardless, the news of this fixed .40% is interesting for those who have not yet purchased their 2022 $10,000 limit. And it’s interesting for all of us who plan on purchasing an additional $10,000 in I Bonds when our annual limit resets in January 2023. Aside from the 6.48% and future rates, we’ll get a .40% fixed rate added to all future I Bond earnings.
    Chuck
  • On December 14, 2022, 12:00
Tags: bondshigh yield

View Comments (210)

  • Can any one explain"30-year term of the I Bonds"? Thanks!

    If I bought I-bond today and keep to buy every year until 29 years, Can I take all fund on the first day of 30- year?

    • Whenever you buy a bond, it stops earning interest after 30 years. Each bond purchase is separate.

      • Thanks.

        My understanding I bond is for young people. For example, if a 60 years old person can not hold 30 years.

        • The 30 year term is the max holding period. You have to hold for a minimum of 12 months. There is a 3 month interest penalty if redeemed within 5 years. Interest stops earning at 30 years.

  • Can someone answer me this question?
    if I purchase 5k I-bond before 4/28/23 can I get 0.4% fixed rate for future 10K purchase or only for future 5k purchase?

    Thanks!

    • @guest_1603773 The 0.4% fixed rate only applies to bonds issued in the period through the end of April up to a maximum of $10k. So you would only be able to get a 0.4% fixed rate on the $5k I-bond you purchase before 4/28/23 and an additional $5k purchase if you are able to fit it in before 4/28/23 as well. Then a new fixed rate will apply to the I-bonds issued through October. They will announce the new fixed rate for the next 6 month period on 5/1/23. The good news is the new fixed rate through October will likely be positive as well. It may even be above 0.4%!

  • Can someone help me with this question please?
    So I bought these in Oct 2022, do I need to declare something while doing my taxes? I didnt get any 1099 forms from Treasury Direct.

    Series I Savings Bond 10-28-2022 Security Issued $10,000.00

  • As a follow up to Snowbird's post, the new variable rate means the average combined rate for a newly issued I-bond purchased before the end of the month will be an average of 6.893% and 3.807%, or 5.35% for the first year if held beyond 5 years. If redeemed at one year, losing last three months of the 3.807% combined rate, these I-bonds would yield 4.43%. Not as terrible as I had imagined due to that MoM 0.5% print a few months ago! Might be worth a 15 month hold.

    • Nope, definitely not buying this I-bond. After getting a reminder to double check on these before the end of the month, the 15 month hold is not actually a good idea--that would be a 4.28% yield. Besides betting on an unlikely ramp up in inflation in the next 6 months I suppose...

    • Is it a good time to purchase 2023 I-bond in April and not to wait to November to purchase?

    • That is my math too. For those that bought when the rate was 7.12% or 9.62%, that probably means a sale once three months of 3.39% is passed (and only the three 3.39% months are wiped out with the early withdrawal). The base rate will be better for new bonds. Federal interest might still be worth it for benighted Californians or New Yorkers, as it is only taxed federally.

  • Can I buy $15000 total in a calendar year?

    In a calendar year, one Social Security Number or one Employer Identification Number may buy:
    up to $10,000 in electronic I bonds, and
    up to $5,000 in paper I bonds (with your tax refund)

  • Any chance of fixed rate component (0.4) going up significantly for the next issue? I understand nobody knows for sure, but what is a general sentiment?

  • I'm assuing that if I buy now (March) or next month, I would get 6.89% for 6 months, but do we know the rate right after that 6 months? Trying to figure out if it is still cometetive given the high rate of CDs right now

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