Should you buy Series I bonds amid higher inflation? What experts say
Natalia Gdovskaia | An | Getty Images
As consumer prices rise amid the Iran war, some investors are looking for ways to combat inflation.
The only option Series I bonds Some experts say a government-backed, virtually risk-free asset may now be more attractive. But others may prefer more flexible options.
The U.S. Treasury Department announced last week that newly purchased I bonds will pay 4.26% annual interest through October 31, down from the 4.03% yield offered through April 30.
When inflation rises, “I bonds definitely become more attractive,” said Ken Tumin, founder of the blog DepositQuest.com, which tracks I-bond rates as well as other deposit accounts.
Demand for I bonds has increased before amid rising inflation. As yields are tied to the consumer price index, bond yields reached a record high of 9.62% in May 2022 and investors flocked to the assets.
As prices cooled, many redeemed their I bonds. But there has been more interest since the March inflation data, according to David Enna, founder of Tipswatch.com, a website that tracks Treasury inflation-protected securities, or TIPS and I bond yields.
The consumer price index, or CPI, a key indicator of inflation, rose 3.3% year-over-year in March 2026, up from 2.4% in February, the Bureau of Labor Statistics reported in April. This data reflected higher gasoline and other rising costs resulting from the Iran war, contributing to the latest 4.26% I bond rate.
“I think 4.26% is very competitive compared to Treasury bills or money market funds,” said Enna, who does not expect inflation to decrease in the next few months.
As of May 4, most Treasuries or Treasuries with maturities of four to 52 weeks were yielding around 3.7%. Meanwhile, some of the largest money market funds had similar returns. Crane Data.
While there is a bond electronic purchase limit of $10,000 per person per year, Enna and Tumin like short-term cash holdings to add to an emergency fund, depending on your timeline.
bond rates variable and fixed rate part. When you buy, you lock in a fixed rate, currently 0.90%, until you sell. However, the variable portion, currently 3.34%, adjusts every six months depending on when you purchased the asset.
Disadvantages of I bonds
If you’re considering I bonds, experts say it’s important to know the balance between them, especially when compared to other assets.
Bonds are not as flexible as Treasury bills, money market funds, or high-yield savings accounts. For newly purchased I bonds, you won’t be able to access the cash for at least a year, and if sold within five years, there will be a three-month interest penalty.
If your investment timeline is only around a year, Enna recommends treasury bills over I bonds because the three-month interest penalty reduces your return.
You should also: If you don’t have an existing account and aren’t familiar with the platform, purchasing I bonds through TreasuryDirect requires extra work, experts say.
“Overall, the hassle of dealing with these isn’t worth the $10,000 marginal benefit,” said certified financial planner Dinon Hughes, a partner at Nvest Financial in the Boston area.
