Are April 2025 I Bonds Worth Buying? Rates at 5.27% and Inflation Insights

Essential Highlights

• In 2022, I Bonds reached an unprecedented 9.62% yield amid soaring inflation, but today's rates have significantly dropped.
• For short-term investors, high-yield CDs currently offer better locked-in returns than I Bonds.
• Long-term savers seeking inflation protection may still find April's I Bonds appealing due to their strong fixed rate component.
• Timing is critical: buying I Bonds before May 1 locks in higher rates for the first six months compared to those purchased later.

Continue reading below for detailed insights and partner offers.

Understanding How I Bond Rates Are Calculated

I Bonds, issued by the U.S. Treasury, adjust their yields based on inflation trends. When inflation rises, I Bond returns increase; when inflation falls, yields decrease accordingly.

The Treasury updates I Bond rates twice yearly—in May and November—based on recent inflation data. This means your I Bond rate is guaranteed only for six months at a time.

Each I Bond rate combines a fixed component, set for the life of the bond (up to 30 years), and a variable inflation component recalculated every six months.

I Bonds bought from November 2023 through April 2024 carry a fixed rate of 1.30%. Combining this with the current inflation adjustment results in a composite rate of 5.27% for bonds purchased by April 30.

Based on recent inflation figures, the variable rate for bonds issued starting May 1, 2024, is expected to drop by roughly 1%, reducing the composite rate for months 7–12. Rates beyond that depend on inflation trends through October 2024.

This current rate is notably lower than the historic peak of 9.62% seen in 2022 but still offers respectable inflation protection.

Why Short-Term Investors Should Consider CDs Instead

For those aiming to invest for a few years rather than decades, certificates of deposit (CDs) present a compelling alternative:

• CDs currently offer higher yields than I Bonds across all terms from 3 months to 5 years, with top APYs reaching up to 5.65% as of April 26, 2024.
• CDs lock in a fixed interest rate for the entire term, providing predictable returns, unlike I Bonds which reset rates every six months.

While early withdrawal penalties apply to CDs, I Bonds also impose penalties if redeemed before five years, including a three-month interest forfeiture, and funds cannot be redeemed during the first year.

High-yield savings accounts are another option, offering rates up to 5.55%, but their variable rates can fluctuate with Federal Reserve policy changes.

Long-Term Investors: Why April Purchases Matter

Despite less appeal for short-term goals, I Bonds remain an excellent choice for long-term savers seeking safety and inflation protection. After five years, the early withdrawal penalty is waived, making them ideal for retirement savings.

If you haven't maxed out your 2024 purchase limit of $10,000 per person, buying I Bonds before April 30 secures the higher 5.27% initial rate for six months. Bonds issued from May 1 will reflect a lower rate due to inflation adjustments.

The fixed rate component, currently at 1.30%, is expected to remain stable but is officially set only at the May 1 announcement.

Purchasing in April guarantees the known composite rate, while May buyers might receive a slightly higher fixed rate but will start with a lower initial yield.

Urgent Advice

To secure an April 2024 issue date for your I Bonds, make your purchase before April 30. Transactions initiated on April 30 may not qualify for April issuance. You can buy directly online via TreasuryDirect.

Top Savings and CD Rates for May 2025

• Best CD Rates: Up to 4.50%
• Best High-Yield Savings Accounts: Two options offering 5.00%
• Best Money Market Accounts: Up to 4.40%

How ZAMONA Identifies the Best Savings and CD Rates

ZAMONA monitors daily rates from over 200 federally insured banks and credit unions nationwide, evaluating only those with minimum deposits of $25,000 or less. Eligible institutions must be FDIC or NCUA insured and offer services in at least 40 states.

Credit unions requiring donations above $40 for membership are excluded. For full details on our selection process, visit our methodology page.

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