Breadcrumbs

savings bonds

Yields on Series I savings bonds have captured market headlines this year, given the bonds are currently paying 9.62% (for bonds issued between May and October of 2022).  This compares favorably to the national average bank account yield of 0.06% (according to Bankrate) and less than 3% for pockets of high credit quality bond funds.

In short words, Series I savings bonds are issued by the U.S. Treasury and backed by the U.S. government meaning that the bonds can be considered as being relatively low risk.  The inflation rate yield on the bonds is reset twice annually, adjusted for varying U.S. inflation levels which have recently been elevated to their historical norm.  The bonds can be purchased either online on the U.S. Treasury website or with U.S. taxpayers’ Federal income tax refund amounts.

We believe there are several aspects of Series I savings bonds that should be considered, despite the appealing yield:

  • The fixed rate on the bonds is 0.00% and does not change throughout the life of the bond, while the inflation rate (currently 9.62%) resets every 6 months with current levels of CPI. As U.S. inflation levels moderate, the yield on the bonds will decrease.
  • Investors are limited to purchasing a maximum of $10,000 of the bonds. Essentially, a $10,000 investment would currently yield $962 in annual income at current yields.
  • The bonds contain a 30-year maturity and must be held for at least one year, but can be redeemed after 5 years without a penalty. The penalty for redeeming within 5 years (but after 1 year) is 3 months interest.

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Chase D. Conti, CFP®, CAIA

Senior Investment Analyst

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