Bonds and Fixed Income

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>>> Series I Treasury Bonds


https://en.wikipedia.org/wiki/United_States_Savings_Bonds#Series_I


Series I bonds were introduced in 1998[8] and have a variable yield based on inflation. The Treasury currently issues Series I bonds electronically in any denomination down to the penny, with a minimum purchase of $25. Paper bonds continue to be issued as well, but only as an option for receiving an individual's federal income tax refund using IRS Form 8888.[9] The paper bonds are currently issued in denominations of $50, $100, $200, $500, and $1,000, featuring portraits of Helen Keller, Martin Luther King Jr., Chief Joseph, George C. Marshall, and Albert Einstein, respectively. Three additional denominations were previously issued but discontinued: $75, $5,000, and $10,000 featuring Hector P. Garcia, Marian Anderson, and Spark Matsunaga.[10]

The interest rate for Series I bonds consists of two components. The first is a fixed rate which will remain constant over the life of the bond; the second component is a variable rate adjusted every six months from the time the bond is purchased based on the current inflation rate. The fixed rate is determined by the Treasury Department; the variable component is based on the non-seasonally adjusted Consumer Price Index for urban areas (CPI-U) for a six-month period ending one month prior to the rate adjustment. Specifically the variable rate is calculated by looking at the percent change over the previous 6-months of available data, and multiplying the percent change by two. New rates are published on May 1 and November 1 of every year.[11][6] For example, on November 1, 2021 the most recent CPI-U data that was available was from September 2021, where the non-seasonally adjusted CPI-U was 274.310. Six months earlier, in March 2021 the CPI-U was 264.877. Thus, the percent change was 3.56%. Multiplying this by 2 yields the variable component of 7.12%. A history of rates is available on the Treasury Direct website: .

As an example, if someone purchases a bond in February, the fixed portion of the rate will remain the same throughout the life of the bond, but the inflation-indexed component will be based on the rate published the previous November. In August, six months after the purchase month, the inflation component will change to the rate that was published in May. During times of deflation, the negative inflation-indexed portion can drop the combined rate below the fixed portion, but the combined rate cannot go below 0% and the bond can not lose value.[11] Like Series EE bonds, interest accrues monthly and is compounded to the principal semiannually. Also like Series EE bonds, Series I bonds have a life of 30 years, and cease accruing interest after maturity.

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