So many investors are rushing to buyBefore the October 28 deadline to lock in the 9.62% rate, it crashed the website of the US Treasury Department that sells securities that are considered a low-risk hedge against inflation.
The Treasury Direct website was shut down on Wednesday, while some users on social media reported delays in accessing the service and processing their I-bond orders. The delay could deter some investors from completing their purchases before this week’s deadline.
With the deadline fast approaching, according to one agency official, the Treasury Department is opening more I-bond accounts each day than it typically makes in a year. The website, TreasuryDirect, has been around for two decades and was not built to make up for the spike in traffic it was receiving this week, the official said. The agency said Treasury has doubled its server capacity to handle the surge, but the site is still facing a slowdown.
An I-bond is typically a specific investment that provides returns for all urban consumers based on the Consumer Price Index, an inflation gauge. Since US inflation was 2% or less for years, they did not provide attractive returns compared to stocks and other investments.
That changed as inflation rose, raising the guaranteed rate of return on I-bonds to 9.62% this year. Since the Treasury Department resets the rate for I-bonds every six months, the next adjustment will take place the following month. At that point, the I-bond rate will drop to around 6.5% – still respectable, but less eye-popping than the current rate of 9.62%.
Any bond issued before October 31 will have a yield of 9.62%, but the Treasury has said that people ordering by October 28 usually allow several days in bond issuance, leading to the Treasury Direct website. The crowd is increasing.
I-Bonds come with some important limitations. First, a person can only buy $10,000 worth of bonds in a year, with an additional $5,000 allowed if they use a tax refund for the purchase. This limit doubles for married couples. Parents can also buy I-bonds for their children (under the age of 18), although they need to set up separate accounts for each child.
I-Bond buyers are also not allowed to redeem them for the first year. After that, you can sell the bond, but that will forfeit the previous three months’ interest. After five years, investors can sell without any restrictions.