How Series I savings bond interest is calculated

A Series I savings bond earns a rate that changes every six months, based on inflation, according to the Treasury's I bonds interest rates page on TreasuryDirect. The page says the rate can go up and can go down, and that an I bond earns interest until it is cashed or reaches 30 years old, whichever comes first.

The Treasury says the interest on an I bond combines two parts: a fixed rate and an inflation rate. The fixed rate is known when the bond is bought and never changes for the life of that bond. The Treasury announces a fixed rate every May 1 and Nov. 1, and that rate applies to all I bonds issued during the following six months. The inflation rate is also set every May 1 and Nov. 1, and the page says it is based on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers, CPI-U, for all items including food and energy. Unlike the fixed rate, the inflation rate applies to every I bond ever issued, for six months at a time.

The combined rate, which the Treasury also calls the composite rate or earnings rate, comes from a published formula: the fixed rate, plus two times the semiannual inflation rate, plus the fixed rate times the semiannual inflation rate. The page works through one case using a 0.90% fixed rate and a 1.67% semiannual inflation rate: 0.0090 plus 0.0334 plus 0.0001503 gives 0.0425503, which rounds to 4.26%. The page lists 4.26%, including a 0.90% fixed rate, as the rate for I bonds issued from May 1, 2026, to Oct. 31, 2026. Because new rates are set on Nov. 1, that figure describes a period that is ending and is not a guide to what comes next.

The Treasury says deflation can pull the combined rate below the fixed rate, as long as the fixed rate is not zero. If the inflation component is negative enough to push the combined rate below zero, the page says the Treasury stops at zero. Its history tables show negative semiannual inflation rates were set on May 1, 2009, at -2.78%, and on May 1, 2015, at -0.80%.

Although new rates are announced in May and November, the date a new rate starts for a given bond depends on its issue month. The page says the rate changes every six months from the issue date, so a bond issued in January moves to a new rate on July 1 and Jan. 1, and a bond issued in May moves on Nov. 1 and May 1.

I bonds earn interest from the first day of the month they are bought, the Treasury says. Twice a year, all the interest earned in the previous six months is added to the bond's principal value, and the next rate applies to that larger amount. The page calls this semiannual compounding. Investor.gov, run by the Securities and Exchange Commission, defines compound interest as interest paid on principal and on accumulated interest.

One more rule affects the value shown on a bond. The Treasury says that if a bond is cashed before it is five years old, the last three months of interest are not paid, so values shown in TreasuryDirect and in its Savings Bond Calculator for bonds under five years old leave those three months out. This article describes the Treasury's published rules. It does not say whether anyone should buy, hold or cash an I bond.