I Bonds Pay 5.51% Through April 30, With Lockup and Redemption Trade-Offs

According to CNBC, newly purchased Series I bonds pay a 5.51% annual rate through April 30, up from 4.26% for bonds bought through October. The rate combines a 4.08% variable component, which resets every six months based on the consumer price index, and a 1.40% fixed component that remains unchanged for as long as the bond is held. The composite rate is the highest since November 2022, while the fixed rate is the highest since 2006. Individuals can buy up to $10,000 in electronic I bonds per calendar year. Funds cannot be redeemed during the first 12 months, and redemption before five years forfeits the last three months of interest. Interest is tax-deferred until redemption and is exempt from state and local taxes; federal taxes may be avoided when proceeds go toward qualified education expenses. Ken Tumin of DepositQuest.com said the rate makes I bonds competitive with shorter-term cash options for the first six months after purchase. Certified financial planner Eileen Olson said the annual purchase cap may make I bonds less useful for larger portfolios and favors Treasury inflation-protected securities (TIPS), which have no purchase limit. As of Nov. 2, TIPS yields ranged from about 2.3% to above 3% for 30-year terms. Some Treasury bill yields were well over 4%, while leading high-yield savings accounts and some one-year certificates of deposit offered rates above 4%. Some large money market funds paid around 4%, as of Nov. 2.