Why would anyone want to buy I Bonds? Does a guaranteed interest rate of 7.12% do anything for you? How about 9.62%? Buy now, and you’ll get both rates.
While you may not be a huge fan of the issuer — that would be the U.S. Treasury — you’re not going to find many safer fixed-income sources. After all, the Treasury has the power to create money.
These bonds are not new, but they’re newly enticing. The interest rate is tied to one of the U.S. Government's measures of inflation, the CPI-U, and that’s been going nowhere but up in recent months.
It’s a combination of a fixed rate (currently 0%) and a variable rate, each of which is updated every six months in November and May. The fixed-rate has been under 1% since May of 2008 and has not been above 2% since 2001.
On the other hand, the variable rate has been as low as an annualized -5.56% during the Great Recession and has never been as high as it is now (7.12%) since I Bonds were first issued in 1998.
That interest rate is expected to climb to 9.62% for those purchased in the six-month period from May to November of 2022.
Note that the interest for every I Bond ever issued is updated every six months. Every I Bond purchased in the first two, and a half years these were offered is now paying over 10% annualized for the next six months.
Understand that the interest rate for all I bonds will change in May of 2022 and every six months thereafter based on the inflation rate of the previous six months. This rate is calculated for the six months, including March and September, with the numbers released in April and October.