Dedicated to Deposits: Deals, Data, and Discussion

Treasury Announces New I Bond Rate of 5.64%

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The Treasury just released the new I Bond rates this morning. The new fixed rate is 0.70%. When combined with the new inflation rate of 4.92%, the total rate is 5.64%.

The inflation component was already known based on the previous CPI numbers. However, the fixed rate component is determined secretly by the Treasury. Last May the Treasury set this fixed rate to 0%. The 0.70% rate is much improved, but it's still lower than it has ever been before 2008. Below is a summary of the old and new I Bond rates:

New rates for November 2008 through April 2009:

fixed Infl Combined
rate rate rate
0.70% 4.92% 5.64%


Old rates that ended in October 2008:

fixed Infl Combined
rate rate rate
0.00% 4.84% 4.84%

For a history of I Bond rates please refer to this post.

The 5.64% rate may look appealing, but it's important to consider that recent inflation is why it's so high. As can be seen in the last month, gas prices have been going way down. So it's likely we'll see a much smaller inflation rate in May 2009.

A good example of what may happen occurred in May 2006. The I Bond inflation component on November 2005 was very high due to the gas price spikes triggered by Hurricane Katrina. When gas prices subsided, inflation went down. The result was an I Bond inflation component in May 2006 of only 1.00%. So if you buy an I Bond now, you may be very dissappointed in the rate during the second 6-month period.

Another downside of I Bonds is the low annual perchase limit ($5,000 for electronic and $5,000 for paper). Please refer to the Treasury Direct page for the official details.


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