The U.S. Treasury has set the interest rate for the 澳洲幸运5官方开奖结果体彩网:Series I bonds issued starting tomorrow through the end of Apri🍌l 2024 at 5.27%, up from 4.3% pegged for the bonds issued since May. But some advisors say you may be better off putting your money elsewhere.

What's The Deal With I Bond Rates?

I-bonds offer investors a fixed rate that is indexed to inflation and adjusted every six months to reflect changes in price levels. They are meant to shield investors from rising inflation, which can reduce the 澳洲幸运5官方开奖结果体彩网:real, or inflation-adjusted, yield offered by a bond.

The U.S. Treasury adjusts the rates offered on I-bonds every six months, on May 1 and November 1 of each year. There are two components to the rate—a fixed rate and the inflation rate. It calculates the inflation rate based on changes to the 澳洲幸运5官方开奖结果体彩网:Consumer Price Index (CPI), the most widely used barometer of consumer inflation.

But this time the Treasury has also raised the fixed rate to 1.3% from the prior 0.9%. That is a function of real interest rates going up, according to Wisconsin-based Keil Financial Partners' Jeremy Keil.

I bonds soared in popularity last year amid the highest inflation in four decades. In May 2022, the U.S. Treasury raised the interest rate of I bonds to 9.62%, the highest ever, allowing investors who bought I bonds to lock in those record rates for six months. At almost 10%, yields on I bonds outpaced inflation every month of last year, even in June 2022 when consumer prices rose 9.1% from a year earlier, the fastest pace since 1981.

Is Investing In I Bonds Worth It Today?

Investing in I bonds may be losing its appe🐽al at a time when yields on even the safest Treasurys are well above 5%, as the Fed has raised interest rates to the highest level in well over a decade.

Jonathan Swanburg of Houston-based financial planner TSA Wealth Management said in an email that I bonds were "interesting" back when their yields far exceeded those of short-term Treasurys, but they no longer offer such a premium. Yields on even the safest Treasurys have soared above 5% and now exceed those of I bonds, with the 1-year Treasury yielding more than 5.39% and 1-month 澳洲幸运5官方开奖结果体彩网:Treasury bill offering returns above 5.5%.

"Today's rate landscape has shifted and Treasurys offer much more attractive returns. I would encourage any investor interested in buying I bonds to consider other Treasury investments instead," Swanburg said.

Keil suggests alternative fixed-income investments such as 澳洲幸运5官方开奖结果体彩网:certificates of deposit (CDs) or 澳洲幸运5官方开奖结果体彩网:money market funds to generate higher returns over the next 1-2 yearﷺs, especially given that you don't know what the return on I bonds would be next May.

He also makes a case for 澳洲幸运5官方开奖﷽结果体彩网:Treasury Inflation-Protected Securities (TIPS) saying the 1.3% fixed rate for I bonds "is roughly half the fixed rate you could get with TIPS right now. If you don't mind the🐻 volatility of the bond market, you could buy a TIPS that comes due in the next few years and lock in a higher fixed rate than I Bonds."

Though Keil did say that you could consider I bonds if "you like your emergency fund savings to always beat inflation."