The Series I bond rate is 6.89% due April 2023

The Series I bond rate is 6.89% due April 2023

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The U.S. Treasury Department announced Tuesday that the Series I bonds will pay 6.89% annual interest through April 2023, down from 9.62% per annum on offer from May.

That’s the third highest rate since I bonds were introduced in 1998, and investors can lock in the rate for six months by buying any time before the end of April.

“The 6.89% rate is another very competitive rate for the I bond compared to other conservative alternatives,” said Ken Tumin, founder and editor of DepositAccounts.com. poems and bondsamong other things.

Backed by the US government, I bonds do not lose value and earn monthly interest with two parts: a fixed rate, which remains the same after purchase, and a variable interest rate that changes every six months depending on inflation.

While early estimates are for And the bond rate was 6.48%the new rate includes a 0.4% increase for the fixed rate portion, based on more Treasury securities for protection against inflation offerings, Tumin explained.

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TreasuryDirect publishes new rates every May and November.

You can buy funds online TreasuryDirect, limited to $10,000 per calendar year for individuals. You can also use your own federal tax refund to purchase an additional $5,000 in paper I bonds.

on October 28, TreasuryDirect crashed because investors rushed to meet lock-in period 9.62% annual rate for six months. A spokesman for the department said the traffic had “put significant pressure and strain on the 20-year-old TreasuryDirect application”.

Despite technical problems, TreasuryDirect sold a record $994 million I bond on October 28almost as much in one day as was sold in the three years from 2018 to 2020.

The downsides of I bonds

While the current rate of I bonds may be attractive, experts point to several drawbacks.

One of the trade-offs is that you can’t touch the money for at least a year, and you’ll lose the previous three months of interest if you redeem it before five years.

Another downside is lower income in the future, explained certified financial planner Christopher Flis, founder of Resilient Asset Management in Memphis, Tennessee.

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Depending on future inflation, the variable portion of interest on bonds I may be adjusted again in May. With an inflation target of 2 percent, “the Federal Reserve will not rest until that number comes down,” he said.

And as interest rates rise, the difference in yields between I bonds and other government-backed assets, such as 2-year treasury, becomes smaller and smaller. “The relative attractiveness of these assets is diminishing,” Fliss said.

Even with money left over after other financial priorities are covered — no credit card debt, no emergency fund and no 401(k) match — Fliss wouldn’t choose I bonds as the next option.

“Long-term investors, especially younger ones, should really look at the stock market as the backbone of their portfolio,” he said. “I’m certainly not the obligee.”

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