Treasury announces new Series I bond rate at 3.98% amid inflation concerns

On April 30, 2025, the U.S. Department of the Treasury released the updated interest rates for Series I bonds. The new rates will take effect on May 1, 2025, and will be applicable until October 31, 2025. The current rate of 3.98% marks an increase from the previous rate of 3.11% that was in effect since November 1, 2024. Despite this increase, it remains lower than the 4.28% yield recorded through October 2024. The Series I bonds are designed to provide a safeguard against inflation, making them an appealing choice for investors looking for a reliable income stream tied to the cost of living changes, which have significantly fluctuated in recent years. The latest Series I bond rate includes both a variable portion based on inflation, which is set at 2.86%, and a fixed portion of 1.10%. A comparison reveals that this fixed rate has decreased from the previous figure of 1.20%. The fixed rate component is especially crucial for long-term investors since it remains constant for the lifetime of the bond. The mechanism for I bonds interest rates is adjusted biannually, every May and November, taking into account the most recent inflation data. Current bondholders can expect their rates to adjust based on their individual purchase dates. Therefore, an owner who originally purchased bonds in March, for example, would see their variable rate change to the new inflation-adjusted figure in September while retaining their fixed rate from the initial purchase. This means that bondholders might experience a rate adjustment every six months depending on their buying schedule, allowing a dynamic approach to accommodate inflation rates. The history of I bond yields showcases notable fluctuations, highlighted by a peak yield of 9.62% in May 2022, reflecting the significant impact of inflation on this investment vehicle. Investors are closely monitoring these adjustments, especially given the recent economic landscape characterized by unpredictable inflation rates. The lowered fixed rate might discourage some new investors, but the composite rate's tie to inflation continues to offer a compelling choice for those seeking stable returns concerning rising prices. Moreover, as inflation rates fluctuate, investors are advised to keep abreast of the changing landscape to make the best decisions concerning their bond investments.