Quote:
Originally Posted by rmd2
Does anyone know the answer to this question?
If I buy a US Treasury I Bond will the interest rate ever vary during the term I have the Bond? I Bonds are made up of a fixed interest rate and a variable interest rate based on inflation. If I already have an I Bond and the inflation goes down will the interest rate on the I Bond I already have also go down or does it stay the same for the full term of the bond?
Also are there any costs like buy, sell or manage etc associated with having I Bonds?
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The actual rate of interest for an I bond is a combination of the fixed rate and the inflation rate. The combined rate can, and usually does, change every 6 months.
I bonds protect you from inflation because when inflation increases, the combined rate increases.
Because inflation can go up or down, we can have deflation (the opposite of inflation). Deflation can bring the combined rate down below the fixed rate (as long as the fixed rate itself is not zero). However, if the inflation rate is so negative that it would pull the combined rate below zero, we don't let that happen. We stop at zero.