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Series I saving bonds have offered a high yield with very limited risk as the government pays out a rate of interest that matches the CPI inflation rate. You still have until October 28 to capture a rate of 9.62% on these I bonds from the Treasury Direct website.

Unfortunately, this yield won’t last. Yields are expected to soon decline to around 6% as inflation reduces slightly on current forecasts. As most major asset classes fell in 2022 so far, these I bonds have been understandably attractive to investors for their high yield and lower risk.

However, the broader markets have moved. Now, as a result of significant bond price swings in 2022, Treasury Inflation Protected Securities (TIPS) currently offer to pay a premium on top of the rate of inflation over the coming years.

I Bonds offer to match the rate of inflation, but TIPS may be set up to go one better, currently offering a premium over the U.S. inflation rate. I Bonds haven’t changed, but the rest of the bond market has moved quite dramatically. It may make sense to evaluate your investment options.


At the time of writing 5 year TIPS offer to pay the rate of inflation and another 1.8% on top of that. Of course, that rate is set by the market changes daily.

How has this happened? Well, TIPS are traded bonds with their price set by the market. That’s in contrast to I Series Bonds where the government has a set of rules that enable I Bonds interest payments to follow the inflation rate and hold prices fixed.


In early 2022, TIPS were trading at a level that meant that they would pay out 1.3% below the rate of inflation. In retrospect, as with much of the rest of the bond market those yields weren’t too enticing as inflation surged.

Price Changes

Now TIPS prices have moved significantly, as with much of the fixed income market given past and likely future rate hikes from the U.S. Federal Reserve, and investors may expect to receive a premium over the U.S. inflation rate from TIPS.

We have to go back to 2008 to find TIPS offering this level of premium over the inflation rate. Current yields are not an all-time high, but its well above yields we’ve seen in the past decade.


Still it’s important to note that I Bonds and TIPS are quite different. TIPS are market-traded bonds, so their price can, and does, vary. TIPS price swings can be large and unpredictable as we’ve seen in 2022 with many TIPS funds down double digits year-to-date, though 2022 has been a very bad year for bonds. The good news is that the general sell-off in TIPS in 2022 is exactly what’s enabled TIPS to now offer a premium to the inflation rate.

Because of this a further sell-off in TIPS is possible. That creates risk. In contrast I Bonds carry less risk, just matching the inflation rate without variation in price impacting your return. I Bonds have potentially less drama, but looking forward that could also mean a lower return over the coming years.

Purchase Limits

TIPS don’t have the same purchase limits that I Bonds do, and there are other differences in how the bonds are structured such as tax treatment and holding periods.

As a market traded bond, TIPS carry a greater level of risk of investors than I Bonds do. Yet, it’s notable that 5 year TIPS may now offer a 1.8% greater return over inflation, than I Bonds on a 5-year view, if current prices remain stable. I Bonds were a great option to hedge inflation and may still be, but the changes in the bond market are creating more options for investors to consider.


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