By David Enna, Tipswatch.com
In two months, probably on Halloween morning, the Treasury will announce a new fixed rate, inflation-adjusted variable rate and composite rate for U.S. Series I Savings Bonds purchased from November 2025 to April 2026.
And I have bad news for I Bond investors: The fixed rate is likely to fall from the current 1.10% to 0.90% at the reset. Of course, this is still up in the air, depending on how real yields track over the next two months. But the path looks pretty clear.
The forecast
The I Bond’s fixed rate is its “real yield” — the yield above future inflation. It is important because it is permanent, staying stable for potentially 30 years. So if you bought an I Bond in 2014 with a fixed rate of 0.2%, it will continue to have a 0.2% fixed rate for the life of the bond. Purchases through October 31, 2025, have a fixed rate of 1.10%.
The Treasury has no announced formula for setting the I Bond’s fixed rate, meaning there is no calculation required by law or regulation enforcing the process. It is up to a decision by Treasury officials. However, I Bond watchers have settled on a forecasting tool that seems to work: Apply a ratio of 0.65 to the average 5-year TIPS real yield over the preceding six months. This formula has worked without fail at least since 2017.
With two months to go, I looked at 5-year real yield data from the date of the last reset on May 1, 2025, to the close of Aug. 29, 2025. Looking at just that data, the forecast is for a new fixed rate of 1.00% at the reset.
I added the 10-year TIPS information just because it is interesting — using the 10-year real yield data you get an new I Bond fixed rate of 1.30%, much more attractive. The spread between the 5-year real yield (currently 1.21%) versus the 10-year (1.82%) is amazing. But it also probably irrelevant because the forecasting formula has only worked using the 5-year TIPS real yield.
So, with two months of data yet to come, the I Bond’s new fixed rate would be 1.00%.
Extending the forecast
Now, let’s assume real yields hold steady at current levels through the month of October. That’s a bit iffy because the Federal Reserve is likely to cut short-term interest rates on September 17, and the 5-year TIPS real yield tends to move with those decisions. At this point, however, I think the rate cut is priced in.
In this chart, I added 44 days at current market real yields, which lowers the 5-year real yield average to 1.420% and in turn drops the 0.65 ratio to 0.923%, resulting in a new fixed rate of 0.90%. The forecast using the 10-year real yield remains at 1.30%, but I don’t believe it is relevant.
Keep in mind: The I Bond’s fixed rate is always rounded to the one-tenth decimal point. That means a further fall to 0.80% is unlikely.
As of today, I project a new I Bond fixed rate of 0.90%.
This chart demonstrates the accuracy of this projection method for every year back to 2017. (Of course, we can’t be sure the current administration will continue on this course.)
What this means
One immediate conclusion is that the I Bond’s current permanent fixed rate of 1.10% and composite rate of 3.98% for six months is attractive. I Bond investors who haven’t bought the full 2025 allocation ($10,000 per person per calendar year) should consider making a purchase before November 1.
Hard to say just yet, but the new variable rate could be around 2.8% to 3.0%, resulting in a new composite rate pretty close to the current 3.98%. But a higher fixed rate, which is permanent, is always preferable. Here is the trend in I Bond rates over the last five years:
In 2022, we got that gaudy 9.62% variable rate for six months, but it was tied to a fixed rate of 0.0%. After a year or two, investors were dumping that investment, which is currently yielding 2.86%. The fixed rate of 1.30% that came later was much more attractive, in my opinion, as a long-term investment.
In January, would I be buying I Bonds with a fixed rate of 0.90%? Not in January, probably, but later in the year, yes. I’d probably wait until mid-April to see the trend in real yields and inflation.
As the reset date approaches, I will be writing more on this topic. This article is meant as a heads-up for investors speculating that we could get a boost in the fixed rate, which is unlikely.
And, again, we can’t be sure the Treasury won’t simply ditch our much-trusted 0.65 ratio and set the I Bond’s fixed rate in a radically different way. (Not likely, I hope.)
FYI: I focused this article on future rates and didn’t attempt to explain the investing purposes of I Bonds or their intricacies. You can find a lot of that information in these links:
• Confused by I Bonds? Read my Q&A on I Bonds
• Let’s ‘try’ to clarify how an I Bond’s interest is calculated
• Inflation and I Bonds: Track the variable rate changes
• I Bonds: Here’s a simple way to track current value
• I Bond Manifesto: How this investment can work as an emergency fund
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David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
