I Bond Rate Rises to 5.51%, Fixed Rate Hits 20-Year High

The U.S. Treasury has announced a new 5.51% annualized interest rate for Series I savings bonds, up from the previous 4.26%. The new rate applies to bonds issued between November 1, 2026, and April 30, 2027.

Particularly noteworthy is the 1.40% fixed-rate component, the highest since 2006. Unlike the inflation-adjusted portion, the fixed rate remains in place for the life of the bond.

Read more about the rate announcement on CNBC.

Rate Breakdown

• Fixed rate (1.40%): Established when the bond is purchased and remains unchanged for its life, up to 30 years.
• Inflation-based rate (2.04% semiannually): Adjusts every six months based on changes in the Consumer Price Index.

Together, these components produce the new 5.51% annualized composite rate. The Treasury's calculation accounts for the interaction between the fixed and inflation-based components.

The initial composite rate applies during the bond's first six months, after which it adjusts based on inflation. The 1.40% fixed component remains unchanged.

‍Tax Treatment

• State and local tax exemption: Interest earned on I Bonds is exempt from state and local income taxes.
• Federal income tax deferral: Individual investors can generally defer reporting interest for federal income tax purposes until redemption or maturity, rather than reporting it annually.

Learn more about interest income and taxation — IRS Tax Topic 403

Key Considerations

• Annual purchase limit: Individuals can generally purchase up to $10,000 in electronic I Bonds per calendar year through TreasuryDirect.
• 12-month holding period: I Bonds generally cannot be redeemed during the first year, with limited exceptions.
• Early redemption penalty: Redeeming an I Bond before five years results in the forfeiture of the previous three months of interest.
• Variable interest rate: The inflation-based component adjusts every six months, meaning the initial 5.51% composite rate is not guaranteed for the life of the bond.

Review I Bond purchase limits and redemption rules — TreasuryDirect

*Illustrative purposes only - I Bonds can only be purchased electronically
What Makes This Rate Noteworthy?

• Higher composite rate: The annualized rate increased from 4.26% to 5.51%, reflecting changes in both the fixed and inflation-based components.
• 20-year-high fixed rate: At 1.40%, the fixed component is the highest since 2006 and remains unchanged for the life of the bond.
• Long-term significance: I Bonds purchased at different times may carry different fixed rates, even when subject to the same inflation adjustments.

Additional Resources

• TreasuryDirect: Series I Savings Bonds
• TreasuryDirect: I Bond Interest Rates and Historical Data
• IRS: Tax Topic 403 — Interest Received
• CNBC: Treasury Announces New I Bond Rate
• NerdWallet: I Bond Calculator

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