How to Calculate the I-Bond Composite Rate for Any Given Period

The Formula Treasury Publishes but Most Holders Skip

The U.S. Treasury sets the I-Bond composite rate twice per year, in May and November. The formula is published in full. Most holders never look at it.

Here it is in plain text:

Composite Rate = Fixed Rate + (2 x Semiannual Inflation Rate) + (Fixed Rate x 2 x Semiannual Inflation Rate)

That third term is not cosmetic. At high inflation, it materially affects the output.

Break the formula into three components:

1. Fixed Rate. Set at issuance. Applies for the bond's 30-year life. Currently ranges from 0.00% to 1.30% depending on the purchase date.
2. Semiannual Inflation Rate. Derived from the non-seasonally adjusted CPI-U change over a 6-month reference period. Changes every May and November.
3. Cross-product term. Fixed Rate multiplied by twice the semiannual inflation rate. This reflects the compounding interaction between the two components.

The composite rate is annualized. The semiannual inflation rate is not. Confusing these two produces systematic projection errors.

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Why the Cross-Product Term Matters

At low fixed rates and modest inflation, the cross-product term is small. At a fixed rate of 0.40% and a semiannual inflation rate of 1.69%, the cross-product is 0.40% x 2 x 1.69% = 0.0135%. Negligible.

At a fixed rate of 1.30% and a semiannual inflation rate of 3.56%, the cross-product is 1.30% x 2 x 3.56% = 0.0926%. That rounds to nearly 0.10 percentage points added to the composite rate.

On a $10,000 bond held for 6 months, 0.10 percentage points = $5.00. Over a full year with two rate periods, that is $10.00. Over five years compounding, the gap compounds further.

The cross-product term exists because the fixed rate and inflation adjustment apply to the same principal simultaneously. Treasury builds the compounding into the formula directly rather than leaving it to the investor's spreadsheet.

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Worked Example 1: May 2024 Rate Period

Use the values Treasury announced for the May 2024 rate period:

• Fixed Rate: 1.30%
• Semiannual Inflation Rate: 1.48%

Apply the formula:

Composite Rate = 1.30% + (2 x 1.48%) + (1.30% x 2 x 1.48%)

Step by step:

• 2 x 1.48% = 2.96%
• 1.30% + 2.96% = 4.26%
• Cross-product: 1.30% x 2.96% = 0.03848%
• Composite Rate = 4.26% + 0.03848% = 4.2985%, which Treasury rounds to 4.28%

A $10,000 bond earning 4.28% annualized for 6 months earns approximately $213.85 in that period, before any early-redemption penalty.

Note: Treasury rounds the composite rate to the nearest 0.01%. Running the unrounded intermediate values and then rounding at the end matches their published figures.

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Worked Example 2: November 2022 Rate Period (Peak Inflation)

This period illustrates why the cross-product term cannot be dismissed.

• Fixed Rate for bonds issued May 2000 to October 2001: 3.60%
• Semiannual Inflation Rate: 3.24%

Apply the formula:

Composite Rate = 3.60% + (2 x 3.24%) + (3.60% x 2 x 3.24%)

Step by step:

• 2 x 3.24% = 6.48%
• 3.60% + 6.48% = 10.08%
• Cross-product: 3.60% x 6.48% = 0.23328%
• Composite Rate = 10.08% + 0.23328% = 10.3133%, rounds to 10.31%

The additive-only shortcut gives 10.08%. The correct answer is 10.31%. The difference is 0.23 percentage points.

On a $10,000 bond held for that 6-month period, the shortcut underestimates earnings by approximately $11.50. Across a $50,000 position, that is $57.50 per period, $115 per year.

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How Rate Periods Apply to Your Specific Bond

The composite rate that applies to your bond depends on two variables: when you purchased it and where you are in your 6-month interest cycle.

I-Bonds credit interest monthly, but the rate changes every 6 months from your issue date, not from Treasury's announcement date. A bond issued in March receives a new rate each March and September, regardless of what Treasury announces in May or November.

The sequence works as follows:

1. Identify your bond's issue month.
2. Count forward in 6-month increments to find each rate-change month.
3. Apply the composite rate that was in effect when each 6-month period began.

Treasury's announcement dates do not override your personal rate-change calendar. A May announcement takes effect on your bond only when your next 6-month window opens.

Tracking Multiple Rate Periods

If you hold a bond issued in January 2022, your rate periods run January-June and July-December each year. The November 2022 announcement affected your bond starting in January 2023, not in November 2022.

Mapping this incorrectly shifts your projected value forward or backward by one full 6-month period, a meaningful error when comparing I-Bond returns against HYSA yields or Treasury bills.

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The 3-Month Penalty Before Month 5

Bonds held fewer than 5 years forfeit the most recent 3 months of interest upon redemption. This reduces your realized composite rate for that holding period.

For a bond earning a 4.28% composite rate, the annualized penalty for early redemption between months 12 and 60 equals approximately 1.07 percentage points of annualized yield, assuming a flat rate throughout. The exact figure depends on which 3 months are forfeited and what rate applied during them.

The practical effect: a 4.28% composite rate on a bond redeemed at month 18 yields closer to 3.21% annualized on that position, after accounting for the penalty.

Run this calculation before comparing I-Bond yield to alternatives. The gross composite rate and the net realized yield are different numbers.

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How to Find the Semiannual Inflation Rate Before Treasury Announces It

Treasury derives the semiannual inflation rate from CPI-U data published by the Bureau of Labor Statistics. The formula is:

Semiannual Inflation Rate = (End CPI-U - Begin CPI-U) / Begin CPI-U

For the May announcement, the reference period runs September to March. For the November announcement, it runs March to September.

BLS releases CPI-U data mid-month. The March release comes in mid-April. The September release comes in mid-October. Both precede Treasury's announcements by several weeks.

This means you can calculate the next I-Bond composite rate before Treasury publishes it, with only one unknown remaining: the fixed rate component, which Treasury sets independently of CPI-U.

For example: if the March CPI-U reads 315.80 and the September CPI-U reads 323.47, the semiannual inflation rate is (323.47 - 315.80) / 315.80 = 0.02428, or 2.43%.

With a known fixed rate of 1.20%, the composite rate preview becomes:

1.20% + (2 x 2.43%) + (1.20% x 2 x 2.43%) = 1.20% + 4.86% + 0.05832% = 6.118%, rounds to 6.12%

This gives you a projection before the official announcement, which matters if you are timing a purchase or redemption decision.

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What to Do With Your Composite Rate Calculation

Calculating the composite rate accurately is the starting point, not the finish line. The number becomes useful when you set it against alternatives in the same risk class.

Three comparisons worth running:

1. I-Bond composite vs. 6-month Treasury bill yield. T-bills offer similar credit quality with full liquidity. No 3-month penalty. No $10,000 annual purchase limit. The yield comparison determines whether the I-Bond's inflation linkage justifies the liquidity constraint.
2. I-Bond composite vs. HYSA rate. High-yield savings accounts currently pay between 4.50% and 5.25% at leading institutions. On a post-penalty basis, a 4.28% I-Bond composite rate underperforms. On a 5-year hold, the relationship reverses if inflation rises.
3. I-Bond composite vs. TIPS yield. TIPS offer exchange-traded liquidity and no purchase cap. The breakeven comparison requires adjusting for I-Bond's deflation floor, which guarantees a 0% composite rate minimum.

None of these comparisons work without an accurate composite rate as the input.

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Run Your Numbers Before the Next Rate Announcement

The May and November announcement dates are fixed. CPI-U data arrives roughly 3 to 4 weeks before each announcement. That window gives you time to model the incoming rate, compare it against your alternatives, and make a hold-or-redeem decision with current numbers rather than lagging ones.

The CalcMoney Savings Calculator lets you input any composite rate, any principal, and any holding period to produce a projected value net of the early-redemption penalty. Model the current rate period, then model the projected next period, and compare both against the live HYSA rates the calculator pulls in.

Use the calculator to stress-test the range: current CPI-U trend at the low end, a reversal scenario at the high end. The spread between those two outputs tells you how much of your return depends on inflation staying elevated versus mean-reverting.

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Run your I-Bond projection in the CalcMoney Savings Calculator →