Financial experts predict that the annual rate for newly purchased Series I bonds in the US could rise above 5% in November. This increase would be based on inflation and other factors. Currently, the interest rate for Series I bonds is 4.3% through October 31st, but it was 6.89% between November 2022 and April 2023. The U.S. Department of the Treasury determines the fixed rate for I bonds, but the exact method is undisclosed, making predictions difficult.
Series I bonds have gained popularity in recent years due to high inflation. If the predicted rate increase occurs, it would be the fourth-highest yield for I bonds since their introduction in 1998. The rate for I bonds consists of two parts: a variable rate, which adjusts every six months based on inflation, and a fixed rate, which can also change every six months but is less predictable. The variable rate is currently 3.38%, and experts estimate it could rise to 3.94% in November based on six months of consumer price index data.
While the variable rate can be calculated, predicting the fixed rate is challenging. Financial experts expect the fixed rate to rise, influenced by higher yields from 10-year Treasury inflation-protected securities (TIPS), another government-based inflation-linked asset. The impact of the fixed rate is significant for long-term I bond investors. The exact method used by the Treasury to decide on the fixed rate is unknown; theories include considering market yields on TIPS. The real yield of 10-year TIPS will play a role in determining the fixed rate increase, with an expected range of 1.4% to 1.5% if real yields stay between 2.3% and 2.4% for the next six months.
