What You Need to Know
- With signals that the Fed will wind down asset purchases sooner than expected, this may be as good as it gets for Series I interest rates.
The U.S. Treasury’s Series I savings bonds are no longer a forgotten investment option.
In fact, the government-guaranteed, inflation-protected securities are now among the hottest assets around. The Treasury disclosed that it issued $1.312 billion of Series I bonds in November, according to data released late Monday.
That’s by far the most on record since the department began breaking out monthly totals eight years ago.
Considering that individuals are limited to buying $10,000 a year, that suggests at least 131,200 people sought out the debt, on top of the hundreds of thousands of Americans who had already made their yearly purchase earlier in 2021. (Treasury also allows individuals to purchase up to $5,000 a year of paper Series I bonds specifically by using their federal tax refund on top of the $10,000 annual maximum.)
The reason for the sudden rush of demand is straightforward: The interest rate on Series I bonds, which resets twice a year, soared to 7.12% as of Nov. 1 and is good through the end of April.
That’s double the 3.54% composite rate offered from May through October and is even higher than the 6.2% consumer price index reading for October that forced the Federal Reserve to abruptly signal tighter monetary policy ahead to constrain price growth.
The variable rate rises and falls depending on headline CPI specifically, making it a consistent hedge to persistent inflation pressure.
I referred to Series I bonds as an “anti-Bitcoin asset” in May, just before monthly issuance reached the second-highest level ever. And while that description is still largely applicable, especially after witnessing the crypto crash over the weekend, there’s one way in which they’ve become similar: Hype.