Declining I Bond Rates Make These Alternatives Look More Appealing

Is it time to move beyond I bonds?

Inflation-linked Series I savings bonds have been one of the few dependable return generators in retail investors’ portfolios this year, with yields since May at a record 9.62%.

But I bond yields are likely heading down. According to estimates based on inflation figures between March and September, the rate offered for I bonds purchased after the end of October is expected to be 6.47%.

That’s better than the more than 20% drop in the S&P 500 Index this year and much higher than a standard savings account. But when you take into consideration I bonds’ taxation at the federal level, the notoriously clunky website and declining yields, other somewhat similar options start to look more appealing. That’s a big change from previous years.

“For the better part of the past decade, it was nearly impossible for investors to park in short-term fixed-income vehicles and generate anything more than peanuts,” said Nate Geraci, president of the ETF Store, an investment adviser. “That’s clearly changed this year with rapidly rising rates.”

Bloomberg News interviewed money managers to get their take on alternatives to I bonds.