initial interest rate on new Series I savings bonds is 7.12%

[xray]

Series I Savings Bonds Rates & Terms: Calculating Interest Rates

NEWS: The initial interest rate on new Series I savings bonds is 7.12 percent. You can buy I bonds at that rate through April 2022.

What interest will I get if I buy an I bond now?
How do I bonds earn interest?
How does Treasury figure the I bond interest rate?
Fixed rate
Inflation rate
Combining the two rates
An example
When does my bond change rates?
What have rates been in the past?
What is the current composite rate for my I bond?
Where can I find more information on rates?
What interest will I get if I buy an I bond now?

The composite rate for I bonds issued from November 2021 through April 2022 is 7.12 percent. This rate applies for the first six months you own the bond.

How do I bonds earn interest?

An I bond earns interest monthly from the first day of the month in the issue date. The interest accrues (is added to the bond) until the bond reaches 30 years or you cash the bond, whichever comes first.

The interest is compounded semiannually. Every six months from the bond's issue date, all interest the bond has earned in previous months is in the bond's new principal value. Interest is earned on the new principal for the next six months. For example, in month seven, interest is earned on the original price plus six months of interest. In month 13, interest is earned on the original price plus 12 months of interest. (However, values displayed by the Savings Bond Calculator for bonds that are less than five years old do not include the latest three months of interest. These values reflect the interest penalty.) If you hold the bond for at least five years, when you cash in (redeem) the bond, you receive all the interest the bond has earned plus the amount you paid for the bond.
You can redeem the bond after 12 months. However, if you redeem the bond before it is five years old, you lose the last three months of interest.
How does Treasury figure the I bond interest rate?

The interest on I bonds is a combination of

a fixed rate, and
an inflation rate
To see the current value of your bonds, use the Savings Bond Calculator. When using the Savings Bond Calculator to look up values of bonds that are less than 5 years old, keep in mind that the values of those bonds do not include the latest three months of interest. However, rates shown by the Savings Bond Calculator for those bonds do not reflect that interest penalty.

Fixed rate

You know the fixed rate of interest that you will get for your bond when you buy the bond. That fixed rate does not change during the life of the bond.

Treasury announces the fixed rate for I bonds every six months (on the first business day in May and on the first business day in November). That fixed rate then applies to all I bonds issued during the next six months.

The fixed rate is an annual rate. Compounding is semiannual.

Inflation rate

Unlike the fixed rate which does not change for the life of the bond, the inflation rate can and usually does change every six months.

We set the inflation rate every six months (on the first business day of May and on the first business day of November), based on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy.

However, the change is applied to your bond every six months from the bond's issue date. (The dates for these changes might not be May 1 and November 1.) When does my bond change rates?

Combining the two rates

To get the actual rate of interest (sometimes referred to as the composite or earnings rate) we combine the fixed rate and the inflation rate, using the equation in the example below.

The combined rate will never be less than zero. However, the combined rate can be lower than the fixed rate. If the inflation rate is negative (because we have deflation, not inflation), it can offset some of the fixed rate.
If the inflation rate is so negative that it would take away more than the fixed rate, we don't let that happen. We stop at zero.

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Comment: Lot more to the change taking place. Beats the 4% withdrawal rate discussion [in the short term]....

[richardsok]

Thanks, for the update, X.

I am sitting on some paper I-Bonds I bought for my wife and daughter as Christmas presents 13, 14, 15 years ago. I assume interest on those bonds has also increased. Am I correct?

[xray]

richardsok,
Your:
I am sitting on some paper I-Bonds I bought for my wife and daughter as Christmas presents 13, 14, 15 years ago. I assume interest on those bonds has also increased. Am I correct?

--------

 Hope I am wrong, but I still have bonds, like you, but they stopped paying interest "MANY" years ago [with their announcement at that time]. In other words, they stopped paying interest on their announcement date that was stated....

 You may want to check on this as you can redirect those funds to the new I-Bonds....

Live Long and Prosper....

[Fearchar]

This program is extremely misleading, and appears to be targeted to
individuals that do not fully appreciate the consequences of inflation.

For example, 5 year bonds are currently yielding 1.14%.
5 year bonds with inflation protection have negative yields -1.76%
So, after six months, you will be left holding an asset that will be loosing value over time.
The longer you hold it, the more you will loose in real purchasing power.

However, you can go about boasting about how much you earned (initially) and how you never lost (forgetting about inflation).

A shallow victory! Yeah! Good luck with that.

[Deleted]

Dec 2, 2021 13:09:04 GMT Fearchar said:

This program is extremely misleading, and appears to be targeted to
individuals that do not fully appreciate the consequences of inflation.

For example, 5 year bonds are currently yielding 1.14%.
5 year bonds with inflation protection have negative yields -1.76%
So, after six months, you will be left holding an asset that will be loosing value over time.
The longer you hold it, the more you will loose in real purchasing power.

However, you can go about boasting about how much you earned (initially) and how you never lost (forgetting about inflation).

A shallow victory! Yeah! Good luck with that.

What am I mssing here? 

The Risks of Investing Money in I Bonds
Remarkably, I bonds are one of the only investments in the world that the U.S. government guarantees. If inflation picks up, you will earn more interest through the inflation adjustment. If the economy enters deflation, the I bonds have a guarantee that they will never go below 0% interest per year. This means your purchasing power would continue to increase, even if you weren't earning any interest on your money.

[Deleted]

For those not getting interest - sounds odd. You are supposed to get interest over the life of the bond - 20 years with a 10 year extension, Likely it went negative, so you get nothing.

[Fearchar]

@slooow,

The Federal Gov't is no longer guaranteeing that their bonds will provide returns that exceed inflation.

Yes, rates will be adjusted based on inflation, but they will not provide a return that exceeds inflation.
In the past they did. However, with the Covid pandemic, monetary policy was purposefully changed
in order to stimulate the economy.  But that has hurt holders of Gov't bonds.
So, I find it disingenuous on their part, that they are providing introductory rates that are unsustainable.

Here are charts of showing the historical rates after adjusting for inflation.
Inflation adjusted rates are currently negative....  holders are guaranteed to lose.
In the past, returns were very slightly positive, but never by very much.

[richardsok]

I was thinking of buying these new bonds until I got Xray's post.

He better be wrong.

I will be going to the bank today. If I discover that my paper 2006 I-bonds (bonds I bought for my wife & daughter's future security) have been earning ZERO, it will be just one more nail in the frikkin' coffin of my former trust in this government.

[Deleted]

Okay. I am just hoping to keep up with inflation and see I-bonds as good for meeting that goal.

Earning 0 would mean the fixed component would be 0 like now. See this article - www.depositaccounts.com/blog/inflation-treasury-series-i-savings-bonds/

[yogibearbull]

There is some misinformation here. Check details and discussion at LINK.

[Deleted]

Dec 2, 2021 14:40:59 GMT richardsok said:

I was thinking of buying these new bonds until I got Xray's post.

He better be wrong.

I will be going to the bank today. If I discover that my paper 2006 I-bonds (bonds I bought for my wife & daughter's future security) have been earning ZERO, it will be just one more nail in the frikkin' coffin of my former trust in this government.

You can also go to Treasury Direct and use their Savings Bond Calculator
www.treasurydirect.gov/BC/SBCPrice

My Series I Savings Bonds from May, 2006 are currently paying 8.57%.

[anitya]

Dec 2, 2021 13:42:12 GMT @slooow said:

Dec 2, 2021 13:09:04 GMT Fearchar said:

This program is extremely misleading, and appears to be targeted to
individuals that do not fully appreciate the consequences of inflation.

For example, 5 year bonds are currently yielding 1.14%.
5 year bonds with inflation protection have negative yields -1.76%
So, after six months, you will be left holding an asset that will be loosing value over time.
The longer you hold it, the more you will loose in real purchasing power.

However, you can go about boasting about how much you earned (initially) and how you never lost (forgetting about inflation).

A shallow victory! Yeah! Good luck with that.

What am I mssing here? 

The Risks of Investing Money in I Bonds
Remarkably, I bonds are one of the only investments in the world that the U.S. government guarantees. If inflation picks up, you will earn more interest through the inflation adjustment. If the economy enters deflation, the I bonds have a guarantee that they will never go below 0% interest per year. This means your purchasing power would continue to increase, even if you weren't earning any interest on your money.

I think it is more accurate to say that IBonds guarantee principal.  Series EE bonds guarantee both principal and interest because they are guaranteed to double in value in 20 yrs.  Would have been smarter to buy IBonds towards the end of October so inflation component for about a year worth of interest was already known.  IMO, I would be humble in predicting the future or even predicting the predictors.

P.S.: I was not going to buy IBonds anymore because I have enough but at the end of November, I had cash and free time (dangerous combination?) and it took just 10 seconds to buy another $10k (too small an investment for most retirees?) in my Treasury account.

[richardsok]

UPDATE: just back from bank. Different paper I-bonds from 2007-2008 are earning about 7.5% on average.

[roi2020]

I Bonds earn interest for 30 years.
The interest rate is a combination of a fixed rate and a variable inflation rate which is set twice a year (May and November).

I Bonds issued from Nov. 2021 through Apr. 2022 will earn 7.12%.
Maximum calendar year purchases for individuals are typically limited to $10K (electronic) with an additional $5K (paper) when filing federal income tax returns.

Series I Savings Bonds Rates & Terms: Calculating Interest Rates

[yogibearbull]

Now they say that the secret is out 😎 .

www.bloomberg.com/opinion/articles/2021-12-07/the-secret-is-out-on-7-12-inflation-protected-bonds

"In fact, the government-guaranteed, inflation-protected securities are now among the hottest assets around. The Treasury disclosed that it issued $1.312 billion of Series I bonds in November, according to data released late Monday. That’s by far the most on record since the department began breaking out monthly totals eight years ago. Considering that individuals are limited to buying $10,000 a year, 1 that suggests at least 131,200 people sought out the debt, on top of the hundreds of thousands of Americans who had already made their yearly purchase earlier in 2021. "

[roi2020]

I've seen quite a few articles promoting Series I bonds over the past few months.
This must be one of the worst kept secrets around!