Series 1 bond rate is 6.89% through April 2023

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The US Treasury announced Tuesday that Series I bonds will pay 6.89% annual interest through April 2023, down from 9.62% annual rate Offered since May.

It’s the third-highest rate since an I bond was launched in 1998, and investors can lock in that six-month rate by buying anytime before the end of April.

“The 6.89% rate is another competitive rate for I bonds compared to other conservative alternatives,” said Ken Tumin, founder and editor of Tracks I bondamong other assets.

With the support of the US government, bonds do not lose their value and earn monthly interest in two parts: a fixed rate, which remains the same after purchase, and a variable rate, which changes every six months based on inflation.

While early estimates of I bond rate was 6.48%the new rate includes a 0.4% increase in the fixed part of the price, based on the highest Securities to protect the treasury from inflation Yield, Tumin explained.

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Demand for Series 1 bonds collapses TreasuryDirect ahead of key deadline to lock 9.62%
TreasuryDirect has sold more than $27 billion in Series 1 bonds since November 1

TreasuryDirect announces new rates for May and November.

You can buy assets online through TreasuryDirectLimited to $10,000 per calendar year for individuals. You can also use a file Federal tax refund To purchase additional paper notes of $5,000.

On October 28, TreasuryDirect . crashed Where investors rushed to meet Deadline to lock 9.62% Annual rate for six months. A department spokesperson said the traffic had put “significant strain and pressure on the 20-year-old TreasuryDirect app.”

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Despite technical problems, TreasuryDirect has sold a record number $994 million in I bonds on October 28almost in one day as much as it sold in three years from 2018 to 2020.

Bond Cons

While the current bond price may be attractive, experts point out several downsides.

One trade-off is that you can’t touch the money for at least one year, and you’ll lose interest in the previous three months if you redeemed before five years.

Another drawback is lower future returns, explained certified financial planner Christopher Fleiss, founder of Resilient Asset Management in Memphis, Tennessee.

Depending on future inflation, the variable portion of the bond interest may be adjusted again in May. With a goal of 2% inflation, he said, “the Fed won’t rest until that number goes down.”

As interest rates increase, the difference in yields between bonds and other government-backed assets, such as 2 year treasury, becomes smaller. “The relative attractiveness of these assets is diminishing,” Fleiss said.

Even with excess money after covering other financial priorities—no credit card debt, an emergency fund, and a 401(k) match—Flis wouldn’t choose I bonds as a next option.

“Long-term investors, especially younger ones, should really look to the stock market for the backbone of their portfolio,” he said. “Definitely not a bond.”

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