I bonds are no longer the darling of investors now that the Federal Reserve has raised interest rates 10 times in a row to cool inflation.
Interest rates on I bonds, which are set twice a year on May 1 and Nov. 1, are based on a fixed rate and a variable rate that moves with inflation. Last year, as inflation climbed to a 40-year high peaking at 9.1% in June, I bonds paid as much as 9.62%. Americans flocked to them because that return was much better than the losses endured by investors in the bond and stock markets last year and better than the relatively minuscule interest rate banks offered for deposits.
Since then, inflation has eased below 5%, cutting May’s I bond rate to 4.3%, below the short-term benchmark Fed funds rate of 5% to 5.25% and the 5%-plus investors can get on riskless short-term Treasury bills, financial advisers said.
Medora Lee | USA TODAY