The US Treasury's Series I bonds have had their heyday and it may be time to say goodbye. Way back in 2022, as the stock market declined in tandem with bond funds while interest rates on mortgages more than doubled, the Series I bonds were a wonderful source of high interest earnings. Remember the 9.62% rate! Well, those rates have come and gone.
Then in the fall of 2022, rates dropped to 6.89% and then on May 1st this year, the rates further declined to 4.3% on Series I bonds (and Series EE bonds pay only 2.5%).
With US Treasury bills yielding over 5% right now (for time frames of 3 months to 2 years in term), we are suggesting to many of our clients that they consider selling their Series I bonds and buying the higher yielding Treasurys.
There are some important things to consider when selling your bonds:
You won't earn interest for the current month until the next one begins (so if you are nearing the end of the month, you might as well wait until after the 1st to sell your bonds).
Your I bond yield adjusts every 6 months based on YOUR purchase date, not the Treasury's rate adjustment. [You can find your current rate on your bonds associated with each bond in your TreasuryDirect account].
With inflation dropping due to aggressive actions by the Federal Reserve, future rates on I bonds (to be reset October 1) are likely to decline from the current 4.3%.
If you want to sell your Series I bonds within 5 years of purchasing it, keep in mind that you will lose the preceding 3 months' of interest on your bond. Because you can't sell your bonds until you've held them for 12 months, by the time of this blog post (Sept 2023), almost everyone's bonds are likely paying 4.3% or have only two more months of 6.89% left.
Check your purchase dates and current interest rates and make your decision on when you sell your bonds and then reinvest the proceeds at the 5% and higher opportunities available from bank CDs and US Treasury bills.