Treasury Reveals New I Bond Rate of 1.30%, But Your Bond May Pay Less

The Department of the Treasury announced new rates for I bonds and EE bonds issued between May 1 and Oct. 31, 2024.

New I bonds will pay 4.28% interest, a decrease from the 5.27% rate offered since November 2023. EE bonds will pay 2.7% interest, which is unchanged from six months ago.

The interest rate on I bonds changes every six months, rising or dropping based on inflation. The interest on I bonds is a combination of a fixed rate and an inflation rate. The fixed rate is now 1.30%, and the inflation rate is 2.96%.

I bonds earn interest until you cash in the bond or the bond is 30 years old.

EE bonds issued since May 2005 earn a fixed interest rate for 20 years that is set when you buy the bond, and the rate may adjust after that time. The Treasury guarantees that the EE bond will double in value in 20 years, which is equivalent to a 20-year annual return of about 3.52%.

Rules for interest with older EE bonds vary.

Early release for rates

This is now the third consecutive time that TreasuryDirect, the site for buying and redeeming savings bonds, posted rates a day earlier than their scheduled release. Rates became available on the last business day of April instead of the first business day of May, when they are typically released.

My take on the new I bond rates

The new I bond fixed rate of 1.30% is a slight disappointment. I had thought the rate might increase by 10 or 20 basis points based on how Treasury yields had been rising in the last couple of months. But at least it didn’t decline, and a fixed rate of 1.30% is still the highest it has been since 2007.

The new I bond composite rate of 4.28% is now significantly below today’s top CD rates, top savings account rates and Treasury yields.

Higher earnings are possible with Treasury Inflation-Protected Securities (TIPS). Yields have been trending upward this year, with real yields for TIPS ranging from 2.25% to 2.38%. This exceeds the new I bond fixed rate by about 1 percentage point.

How the I bond rate change works

The I bond rate change was just announced, but your rate may not move immediately: The rate will change every six months from your bond’s issue date.

If you bought an I bond in February 2016, for example, you can expect any rate changes to apply every Aug. 1 and Feb. 1. Consult TreasuryDirect if you need help figuring out when your rate may shift.

Redeeming old I Bonds with low fixed rates

With so many years when the I bond had a fixed rate of 0%, you may have I bonds well below today’s 1.30% fixed rate. Is it time to redeem those bonds and buy new ones? Here are a few factors to consider:

Federal income taxes. When you redeem an I bond, you will owe federal income tax on all interest earned since you purchased the bond. That assumes you deferred tax payments and the funds aren’t being used for qualified higher education expenses.

Annual I bond purchase limits. In a calendar year, you may buy up to $10,000 in electronic I bonds at TreasuryDirect and up to $5,000 in paper I bonds with your tax refund.

Age of bonds. Make sure to redeem I Bonds older than five years first. That will allow you to avoid the penalty of the last three months of interest.

Comparing today’s fixed rate with years past

Fixed rates on I bonds can vary widely based on when you purchased your bond.

If you bought an I bond today, your fixed rate would be 1.30% and your composite rate would be 4.28%. But I bonds issued 24 years ago in May 2000 have a 3.60% fixed rate and a composite rate of 6.61% that will last for six months. An I bond issued in May 2000 had a composite rate of 13.39% for six months after May 2022.

This chart shows the I bond’s rate history from bond issue dates of September 1998 through November 2023.

Overview of Series I savings bond features

Below is a summary of I bond features. More information is available at this TreasuryDirect I bond page:

• You can cash in your I bond after 12 months.
• You lose the last three months of interest if you cash in your I bond within five years.
• Your interest is calculated from a combination of a fixed rate and an inflation rate.
• Your fixed rate remains for the life of the bond.
• The composite rate will never be less than zero.
• The inflation rate resets every six months from your bond’s issue date.
• You can expect new rates to be announced every six months, typically on the last business day of October or April.
• You can defer federal tax payments until you redeem your bond.
• The interest is exempt from state and local taxes.
• Some or all interest is tax-exempt when used for qualified educational expenses.
• The purchase limit per year is $10,000 in electronic TreasuryDirect bonds and $5,000 in paper bonds bought with IRS tax refunds. Additional I Bonds can be purchased in trust and business accounts.