U.S. Treasury I Bond Yield Falls, But Remains Good Buy Javascript must be enabled to use this site. Please enable Javascript in your browser and try again. × Search search POPULAR SEARCHES SUGGESTED LINKS Join AARP for just $9 per year when you sign up for a 5-year term. Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. Leaving AARP.org Website You are now leaving AARP.org and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply. Close

I Bond Rates Drop to 6 89 Percent

Yield on inflation-pegged bonds falls by nearly 3 points but it s still higher than bank CDs

iStock / Getty Images Say farewell to the U.S. I Bond . Say hello to the U.S. I Bond yielding 6.89 percent. True, the new I Bond yield isn’t as high as the old one, but it’s still higher than you will get from other ultra-safe investments. Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. The Treasury Department adjusts the I Bond’s yield semiannually according to changes in the consumer price index (CPI), the government’s main gauge of inflation, over the previous six months. The government announces the yield change on Nov. 1 and May 1 each year. The current yield, the third highest since I Bonds were introduced in 1998, is available through April.

A safe inflation-adjusted rate

As with other Treasury securities, I Bonds are backed by the full faith and credit of the United States, which means they are backed by the full borrowing power of the United States — the country’s strongest credit backing. I Bonds, which are U.S. savings bonds, also carry a fixed rate in addition to the variable, inflation-adjusted rate. From May 2020 through October 2022, that rate was zero. The newly issued I Bond, however, has a fixed rate of 0.4 percent. I Bond holders will get the fixed rate plus the inflation adjustment, for an annualized total of 6.89 percent. Older I Bonds have fixed rates as high as 3.40 percent, which makes the inflation -rate boost particularly sweet for their holders. Those investors will get their original fixed rate as well as the inflation adjustment for the next six months. I Bond yields can never be negative.

Nuts and bolts

You can buy up to $10,000 of I Bonds per calendar year through the government’s . To create an account, you’ll need to provide a Social Security number, an e-mail address, and bank account and routing number s. You’ll also need to create a password and several security checks (such as a password reminder). on your federal income tax return to buy I Bonds with your refund. The minimum purchase is $25; you can specify any amount to the penny. For example, you could buy an I Bond for $143.93, if you wanted to. If you buy your bonds through Treasury Direct, they will be in electronic form. Only the bonds purchased through an income tax refund come in the old paper form. Shopping & Groceries 20% off a Freshly meal delivery subscription See more Shopping & Groceries offers > I Bonds mature in 30 years, but you don’t have to hold them that long. You can redeem them in as little as 12 months — but if you do so before the end of five years, you forfeit your last three months of interest. You don’t need to pay taxes on the interest until you withdraw it — and interest is free from state taxes. It’s also free from federal taxes if you use the proceeds for higher education.

Higher yields ahead

The Federal Reserve hiked its short-term fed funds rate to a range of 3.75 percent to 4 percent on Nov. 2, its . Higher interest rates tend to slow the economy and reduce inflation. Although anyone buying a home will lament higher mortgage rates, savers have a reason to celebrate. For example, a one-year Treasury bill (which you can also buy through Treasury Direct) yielded 4.66 percent on Nov . 1; a six-month T-bill yielded 4.58 percent. A year ago, they yielded 0.15 percent. As with I Bonds, interest on T-bills is free from state and local taxes. Short-term savings accounts haven’t caught up with the Treasury market. The 100 largest money market mutual funds yield an average 2.89 percent, according to Crane Data, which tracks the funds. The average one-year bank CD yields just 1.05 percent, although a few banks are offering 4 percent or more. John Waggoner covers all things financial for AARP, from budgeting and taxes to retirement planning and Social Security. Previously he was a reporter for Kiplinger's Personal Finance and USA Today. MORE FROM AARP AARP NEWSLETTERS %{ newsLetterPromoText }% %{ description }% Subscribe AARP VALUE & MEMBER BENEFITS See more Finances offers > See more Vision Benefits offers > See more Retirement offers > See more Technology & Wireless offers > SAVE MONEY WITH THESE LIMITED-TIME OFFERS