Jetcityimage | Istock | Getty Images
How I bond rates work
I bond rates have a variable and fixed rate portion, which the Treasury adjusts every May and November. Together, these are known as the I bond “composite rate” or “earnings rate,” which determines the interest paid to bondholders for a six-month period.
You can see the history of both parts of the I bond rate here.
The variable rate is based on inflation and stays the same for six months after your purchase date, regardless of the Treasury’s next announcement.
Meanwhile, the fixed rate doesn’t change after purchase. It’s less predictable and the Treasury doesn’t disclose how it calculates the update.
How I bond rate changes affect current owners
If you currently own I bonds, there’s a six-month timeline for rate changes, which shifts depending on your original purchase date.
After the first six months, the variable yield changes to the next announced rate. For example, if you buy I bonds in September of any given year, your rates update every year on March 1 and Sept. 1, according to the Treasury. The Treasury adjusts I bond rates every May and November, reflecting the latest inflation data.
For example, if you bought I bonds in March, your variable rate would start at 1.90% and change to the new rate of 2.86% in September. But your fixed rate would remain at 1.20%. That would bring your new composite rate to 4.06%.