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On Friday, investors blocked the Treasury Department’s website for Series I bonds as they demanded to lock in a record interest rate ahead of a key deadline.
I bonds have proven to be a beacon of hope for investors amid the stock and bond market declines this year. They are one nearly risk-free asset linked to the rate of inflation; as inflation hit its highest level in about four decades, so have bond investors I.
Investors must purchase I Bonds and receive a confirmation email by October 28 to lock in the 9.62% rate, according to Cash Direct. The Treasury will announce the new rate next week.
A breakdown on TreasuryDirect.gov — where investors buy I bonds — may mean they are unable to complete a purchase of I bonds by Friday’s deadline to secure the 9.62% rate. The Treasury Department does not plan to extend the deadline, a department spokesperson said Friday.
The website was intermittently available as CNBC reported the story Friday morning. IsItDownRightNow.coma service that tests web connectivity, said the TreasuryDirect site was unresponsive during testing between approximately 10:30 a.m. ET and 11:45 a.m. ET.
TreasuryDirect.gov became “one of the most visited federal government websites” in the final days of the 9.62% rate window, the Treasury Department said Friday. It usually only hosts a few thousand simultaneous visitors.
During periods when the site was accessible, a note on TreasuryDirect read: “We are currently experiencing unprecedented demand for new accounts and purchases of I Bonds. Due to these volumes, we cannot guarantee that customers will be able to make a purchase by October 28. deadline for the current rate. Our agents are working to help customers who need assistance as quickly as possible.”
A Treasury official confirmed that the site “was briefly unavailable” and had “a few moments of slow performance”.
“In response, the Treasury quickly resolved the underlying issues and more than doubled the site’s connectivity capacity to allow more customers to successfully create accounts and purchase bonds,” the official said. “We continue to balance these efforts with our 20-year-old commitment to overall system integrity and the protection of our customers’ personal identities and financial assets.”
The Treasury issued $1.95 billion in I bonds in the last week of October, according to department figures sent Friday morning. That’s almost double the billion in all of fiscal 2021.
Demand has exploded in recent days. On Thursday alone, users opened 82,000 new TreasuryDirect accounts and purchased $750 million in I bonds. As of midday Friday, the department said users had opened another 52,000 accounts and generated more than $500 million in sales.
The volume has put “significant pressure and strain on the 20-year-old TreasuryDirect app,” a department spokesperson said on Friday.
The site continues to “see customers successfully creating accounts and buying bonds at record highs,” the spokesperson added. “Any additional updates from TreasuryDirect in the final days of the rate window, such as a delay in the November 1 rate change, would pose a significant risk to the operational integrity of the system.”
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Bond rates change twice a year based on inflation.
There are two parts to the rate: a fixed rate, which remains the same after purchase, and a variable rate, which changes twice a year depending on inflation.
The Treasury Department announces new rates every May and November, and you can estimate the next floating rate about two weeks ahead from the consumer price index reports released in April and October.
Estimates provide a brief period to know approximately what you will earn for a year, i.e. how long you will lose access to funds after purchase.
Investors can still lock in the 9.62% annual interest for six months as long as they complete the purchase by October 28. Six months after the date of purchase, you will earn approximately 6.48% for another six months.
“It’s good to know what interest rates you’ll get when you commit to a 12-month lock-in,” said Jeremy Keil, certified financial planner at Keil Financial Partners in Milwaukee.
While it’s too early to estimate May 2023 rates, buying I bonds before the end of October means you’ll receive May and November rates for six months each.
“It’s an option if someone wants the best of both worlds,” said Ken Tumin, founder and editor-in-chief of DepositAccounts.com, who tracks i linkamong other advantages.
While it can be interesting to know roughly I bond yields for a year, there are a few things to consider before buying, experts say.
“The biggest downside is you’re locked up for 12 months,” Keil said. “You can’t remove it for any reason.” And you’ll give up three months’ interest by cashing in before five years.
Still, I bonds may be worth considering for some of your emergency savings, as long as there’s other cash readily available for unexpected costs, he said.
And if you are wait for college tuition bills in 2024, Keil said it was a “good time” to get guaranteed interest for one year, which is tax-free for qualifying education expenses.
— CNBC’s Kate Dore contributed report.