The current bond composite rate is 4.3%. That rate applies for the first six months for bonds issued from May 2023 to October 2023. For example, if you purchased I bonds on May 1, 2023, the 4.3% rate would be in effect until Oct. 31, 2023.
The U.S. Department of the Treasury recently announced I bonds will pay a 4.3% interest rate through October 2023. The current yield on I bonds is down from a peak of 9.62% in 2022, but I bond yields remain historically high.
I bonds are a type of savings bond that are designed to protect your investment from inflation. Some people opt to use their tax refund to purchase I bonds. I bonds have a 4.30% interest rate until October 31, 2023. If rates stay the same you could earn over $434 in interest in one year.
Series I savings bonds are often considered a hedge against inflation. The current composite rate for I bonds is 4.3%. You can't buy more than $10,000 in electronic I bonds for yourself annually.
I Bond cons
The initial rate is only guaranteed for the first six months of ownership. After that, the rate can fall, down to a fixed-rate component which, as of May 1, 2023, stood at 0.9%. One-year lockup.
May 2023 fixed rate will be 0.90%, total composite rate is 4.30% for next 6 months. For Savings I bonds bought from May 1, 2023 through October 31, 2023, the fixed rate will be 0.90% and the total composite rate will be 4.30%.
No, I Bonds can't lose value. The interest rate cannot go below zero and the redemption value of your I bonds can't decline.
Another advantage is that TIPS make regular, semiannual interest payments, whereas I Bond investors only receive their accrued income when they sell. That makes TIPS preferable to I Bonds for those seeking current income.
Investors find I bonds attractive because they provide a helpful way for your portfolio to keep up with inflation. Rates on these bonds adjust each November and May. The rate you receive is locked in for six months after the date of your purchase. These bonds come with some key risk protections, too.
$10,000 limit: Up to $10,000 of I bonds can be purchased, per person (or entity), per year. A married couple can each purchase $10,000 per year ($20,000 per year total). 7.12% interest: The yield on I bonds has two components—a fixed rate and an inflation rate.
I bonds also have important tax advantages for owners. For example, interest earned on I bonds is exempt from state and local taxation. Also, owners can defer federal income tax on the accrued interest for up to 30 years.
10 Year Treasury Rate is at 3.44%, compared to 3.37% the previous market day and 3.05% last year. This is lower than the long term average of 4.25%. The 10 Year Treasury Rate is the yield received for investing in a US government issued treasury security that has a maturity of 10 year.
The composite rate for I bonds issued from May 2023 through October 2023 is 4.30%.
Mortgage Bankers Association (MBA).
“Long-term rates have already peaked. We expect that 30-year mortgage rates will end 2023 at 5.2%.”
For retirees, I bonds represent a robust portfolio option in 2023 – and savvy investors know it. Take the March 2023 I bond composite rate, which stands at 6.89%. That's a good and safe return for retirement investors, who know only too well that capital preservation is the name of the game in retirement.
EE Bond and I Bond Differences
The interest rate on EE bonds is fixed for the life of the bond while I bonds offer rates that are adjusted to protect from inflation. EE bonds offer a guaranteed return that doubles your investment if held for 20 years. There is no guaranteed return with I bonds.
You can cash in (redeem) your I bond after 12 months. However, if you cash in the bond in less than 5 years, you lose the last 3 months of interest. For example, if you cash in the bond after 18 months, you get the first 15 months of interest.
Zero Coupon Bonds
For example, a $1000 bond might be traded on the open market at a cost of $600, to be paid in full after 10 years.
They are free from both credit risk and inflation risk, and they currently offer a risk-adjusted return that is hard to beat. That said, I bonds do have some disadvantages, such as the fact that the bonds cannot be redeemed for one year after purchase and their early redemption penalties.
Contrast this with I Bonds where all inflation adjustments and accrued interest are tax-deferred until the bond matures 30 years after purchase or is redeemed. This means that I Bonds are an extremely tax-efficient savings vehicle, especially for high income earners as a buyer can defer taxation for up to 30 years.
I bonds benefit from the inflation surge as they pay both a fixed rate return, which is set by the U.S. Treasury Department, and an inflation-adjusted variable rate return, the latter of which changes every six months based on the Consumer Price Index. In other words, they can protect your cash against inflation.
The risks and rewards of each
Given the numerous reasons a company's business can decline, stocks are typically riskier than bonds. However, with that higher risk can come higher returns.
Individuals, organizations, fiduciaries, and corporate investors may buy Treasury securities through a bank, broker, or dealer.
Bond prices decline when interest rates rise, when the issuer experiences a negative credit event, or as market liquidity dries up. Inflation can also erode the returns on bonds, as well as taxes or regulatory changes.