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Understanding I Bond Rates
I bond rates comprise two components: a variable portion and a fixed portion, both of which the U.S. Treasury updates biannually in May and November. Collectively, these determine the “composite rate” or “earnings rate,” which specifies the interest amount paid to holders over a six-month period.
The historical data for both components can be reviewed in the I bond rate chart here.
The variable portion is linked to inflation rates and remains constant for six months post-purchase, unaffected by future announcements from the Treasury.
Conversely, the fixed rate is stable after purchase but is inherently less predictable; the methodology for its calculation is not made public by the Treasury.
Implications of Rate Changes for Existing Bondholders
If you hold I bonds, it’s important to understand how the timeline for rate changes operates. This schedule shifts based on your purchase date.
Following the initial six months, the variable yield will adjust to the most recently announced rate. For instance, if you purchase I bonds in September, updates to your rates will occur every March 1 and September 1, as dictated by the Treasury. I bond rates are recalibrated in May and November, influenced by current inflation figures.
As an example, if I bonds were acquired in March, you might see your initial variable rate at 1.90%, shifting to a new rate of 2.86% in September, while your fixed rate would hold at 1.20%. This adjustment would result in a revised composite rate of 4.06%.
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