I Bonds Are Selling Like Crazy. Buy Now Before the Record 9.6% Rate Drops.

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Hurry or you’ll miss out on one of the best deals in the bond market.

The rate on the Treasury’s popular series I savings bonds will drop in November, probably to about 6.5% from the current rate of 9.6% set in May.

Orders for the savings bonds need to placed by 11:59 p.m. Friday through the TreasuryDirect website to get the 9.6% rate for the next six months. Bonds purchased by the deadline will have an Oct. 1 issue date.

Bonds purchased Saturday, Sunday, and Monday will be issued in November, and will have the rate announced by Treasury on Nov. 1—next Tuesday, according to the website.

I Bonds purchased this week will have the 9.6% rate for the first six months and the new rate, more than likely about 6.5%, for the following six months, Barron’s estimates. Over the next year, the rate should be 8.2%—the math: 9.6% plus 6.5% divided by two, plus compounding. Our estimate reflects compound interest. The estimated 8.2% rate compares with 4.6% on one-year Treasury bills.

The new expected rate reflects the change in the consumer price index from March through September. I bond interest adjusts every six months based on the trailing six-month CPI, which isn’t seasonally adjusted.

An investor is limited to $10,000 of purchases each calendar year and can buy another $5,000 annually on paper I bonds with the proceeds of federal tax refunds. And an individual can buy another $10,000 in I bonds through certain business partnerships.

The interest is added every six months to the face value of the bond rather than paid in cash to holders. This compounding eliminates reinvestment risk, or the need to reinvest semiannual interest payments.

Someone who buys $10,000 in I Bonds this week should get about $480 in interest in the next six months, which will be added to the value of the bonds, resulting in a holding worth around $10,480.

An individual needs to hold I Bonds for at least a year and redemptions within 5 years result in a three-month interest penalty. The maturity is 30 years.

One favorable feature is that interest on I bonds is exempt from state and local taxes as is the case with other Treasury obligations.

The record rate for the past six months has resulted in a record number of purchases. There were about $5 billion of I Bonds sold in May, a record monthly total.

Write to Andrew Bary at [email protected]