I Bonds
 

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?

The interest rate is fixed, but the bonds principal increases based on an inflation index. When the principal increases, it is considered taxable income during the year, causing you to have to pay taxes even though no cash flow is generated from the principal accrual portion of the bonds taxable income. The easiest way to invest in them is through a dedicated I bond mutual fund with the likes of Vanguard of Fidelity.

I Bonds
 

I don't care about mutual Funds, taxable income etc.
I only want to know if the current 6.85% on I Bonds will be good for the entire 30 years of the bond or does the Bond I currently have at that rate change at any time during the 30 years when the inflation rate goes down?

The variable rate on an I Bond changes every 6 months - Spring and fall. The fixed rate has been 0% for a long time and in November finally came back at a rate that isn't going to put a dent into anything you care about. Many Youtube Videos to explain how an I Bond works. My guess is you are looking for stability such as a T bill.

I bond rates will change based upon the rate of inflation

You would be wise to have a discussion with the experts at one of the big investment houses, as opposed to getting any information from the internet.

The interest rate for an I Bond" resets" every 6 months based on inflation. For comparison the rate on a 30 year conventional fixed rate Treasury Bond is currently about 3% less at 4%. A new auction for these bonds is held once/month.

No fees are involved if you buy directly from the US Treasury or companies like Charles Schwab.

Announcements, Data & Results — TreasuryDirect

I understand the rates change for inflation but my question is when the rate changes does it change the rate of a bond I bought the PREVIOUS year. If i bought a bond in 2022 at 7% and in 2023 the inflation rate goes down will the interest rate on the bond I ALREADY own go down.

Yes, it will. Your rate is only guaranteed for 6 months. If inflation ever gets under control your rate on existing I Bonds could fall to less than 1%.

Yes but does it retroactively change bonds you already own or just new bonds?

Wow, if that is the case I would never want to buy a 30 yr. bond that you have to wait for 5 yrs to take the money without a penalty.

You could look at it this way. If you sell it in less than 5 yrs you lose the last 3 months of interest. If the interest rate is close to 0% at that time, you will not "lose" much:smiley:

Yes, the interest rate will go up or down on a bond you previously purchased.

I bought Ibonds a few months ago at 9.62 %
They are now at 6.89%

If you go to treasury direct.com they have a chart for all ibond rates and all the changes from the date the bond was issued. I tried to post the chart but was unable to do that.

I would not want a variable rate bond. So thanks for clarifying that for me.

Are you saying that you bought bonds a few months ago at
9.62% and THOSE bonds that you own are now down to 6.89%? or are you saying that you bought bonds at 9.62% a while back but any NEW bonds you would buy TODAY would be 6.89%?

As others have noted, Home — TreasuryDirect is the way you can directly buy ibonds. It has been pretty seamless for me, but I do understand that some people have reported issues. It has become very popular, which may be stressing the site.

Ibonds are limited to $10,000 a year. You and your spouse can both have an account, which allows $20,000 per year. As others have also noted, you can buy treasury bills for larger amounts and variable time frames, with fixed interest rates for the selected time frame.

A good source of information on both of these vehicles for me has been the Wall Street Journal. They have published a number of articles/videos, and you can search them with an online subscription. A subscription is pricy after their trial period, but if you have a library card, you have access to the on-line version for free, at least for the Sumter county library system.

I bonds interest rates — TreasuryDirect

Hope this link works
It’s a link to a chart that shows what the bonds rates have been for all bonds and how they have changed over the years

Yes, I bought bonds a few months ago at 9.62% and THOSE bonds are now at 6.48 % (I made a slight mistake on my first response)
New bonds issued between now and April of 2023 are at 6.89%
All bonds get a new rate every six months. Sometimes up, sometimes down and sometimes remain the same.
Check the treasury direct website for the chart.
May 2022 was the highest rate on the chart. All bonds were getting between 9-13 %
November 2022, the rates changed and all bonds are now getting 6.48%—10.2%

I bonds interest rates — TreasuryDirect

Ok, this link gets you to the treasury direct website.
You have to scroll all the way down to a link that says

all the rates together in one chart

Click that link. Great chart !
Hope this helps

Don’t confuse an I bonds coupon rate with what you actually earn. You earn the bonds yield if you buy and hold to maturity. The yield is made up of three components, two of which are known at purchase, the fixed coupon and the price you pay for the bond. Over time the bonds earned yield is also effected by the inflation adjustment to the bonds principle, which happens every 6 months based on an inflation index. To further complicate matters, if you sell before maturity you will earn what is referred to as the “total rate of return” on the bond, which will incorporate a fourth variable, the price you ultimately sell the bond at. If this is not understood before purchasing, it would be best to invest elsewhere.

Actually, regardless of when you purchase the ibonds you will get that rate for a full 6 months even if the new rate comes out a few days after the original purchase. Example:
For the first six months that you own the I bond, you'll get the prevailing interest rate at that time. For example, any I bond issued between November 2022 and April 2023 earns interest at 6.89 percent annually. That means even if you purchase the bond in April, you'll still earn that rate for a full six months.
Then, your rate will reset at the prevailing rate.

Correct.
The link that I posted shows when each bond rate changes. 6 months after you purchase

Most of the comments are pretty good. I-Bonds adjust every six months from the month of purchase. They are purchased from Treasury Direct. One can buy them in an individual account and a trust account. They accrue interest from the first regardless which day they are purchased. There are two components to the interest rate, but that gets complicated. Yes, they are variable, but that’s the whole point of addressing interest rate risk. They are also liquid after the first year. TIPS are an alternative, but the treasury doesn’t hold very many auctions.

A side note. Treasury Bills and Notes bought directly from the Treasury provide a much better return than most CDs.

What did they tell you when you called a “professional “? Or would you take the answers given here??

All bonds that you own

Research
 

Why would you turn to this forum for any financial matter?
Research it yourself,.

The OP is "researching it him/herself. This is part of the research.

Question, are you related to a poster who has trouble making par?

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.

Since you were obviously getting quite a variety of conflicting answers, I would suggest you try Google and see what the government has to say, as they are the issuers of those bonds.

I-bond interest
 

The I-bond interest rate is composed of two part, a fixed part that is same for the duration of the I-bond, 30 years, and rate determined by inflation over a 6 month period. The fixed rate is set by the treasury department November 1 and May 1 each year. All bonds purchased between November 1 and April 30 will have the same fixed rate as will all bonds purchased between May 1 and October 31. The inflation rate is based on the unadjusted CPI and is set November 1 and May 1. The November 1 inflation rate (ir) is equal to percentage increase in the unadjusted CPI from April through September and the May ir is determined by the percentage increase in the unadjusted CPI from October through March.

The I-bond interest rate is composed of the fixed rate (fr) when the bond was purchased combined with the inflation rate in the following manner:
I-bond rate = fr+fr*ir+2*ir
The i-bond ir changes every 6 months, as described above. When you initially purchase an I-bond it will have the fr and ir associated with date you purchase the I-bond. It's ir will change every 6 month. So if you purchase an I-bond in December, its interest rate will change every December and June.

Taxes on I-bonds are deferred until you cash in the bond. I-bond interest is exempt for state and local income taxes.

Agree! I never cease to be amazed at people that use this forum to criticize people that ask legitimate questions. I have learned alot about the Villages and other topics by reading these forums, and I contribute where I think I have something to offer. If you think a person's post is "dumb", just ignore it and move on to something else.

I bonds have an interest rate of 6.89% until April 2023, then they change according to the inflation rate. Keep in mind they can not be redeemed for 1yr after purchase and if you redeem it before 5yrs, you will loose the last 3 months of interest. I would suggest you read about it at Home — TreasuryDirect Everything you want to know is there and you can start an account, link it to your bank and buy if you wish.

Ibond rates bs Tips
 

Right now I prefer Tips over ibonds. Both pay a fixed rate plus inflation however the fixed rate on I bonds is very small and you can get a fixed rate of around 1.5 percent on TIps meaning you have a 1.5 percent yield ( real rate) above the inflation rate. I have some I bonds purchased in 2002 which have a fixed rate of 3%, so when new bonds were earning over 9 in the past year the 2002 bonds were earning over 12 percent. With I bonds you can choose to pay taxes annually or when you sell them.

Thanks so much for the information. This is not anything I would want to invest in. I like CDs with a fixed rate and a fixed period.

Thanks, this is the information I needed.

Thank you.

Thanks to ALL who replied with helpful information. I did do my "due diligence" and researched the Treasury Website on this subject but I did not see anything written on the subject of the 6th month rate changes affecting PREVIOUSLY OWNED I Bonds. So I am very happy to get the information here from all the nice people who were kind enough to take the time to tell me about this subject.

No, it is not a straight fix for 30 yrs.

As the rates change you can sell out. Rule is have to keep for 1 yr, yr 2-5 you can sell with a 3 month interest fee to close, after the 5th yr you can close with no fee.