I Bonds vs TIPS in 2026: Current Rates and How Inflation Protection Works

I bonds vs TIPS in 2026 is a choice between two Treasury products that protect against inflation in different ways. Series I savings bonds issued from May 1 through October 31, 2026 pay a 4.26% composite rate, built from a 0.90% fixed rate that lasts 30 years and a 1.67% semiannual inflation rate ^[1]. Treasury Inflation-Protected Securities, by contrast, are priced in the market: as of August 26, 2026 the 5-year TIPS yields 2.06% above inflation, the 10-year 2.34% and the 30-year 2.92% ^[4]. On the real yield alone TIPS pay more than twice the I bond's fixed rate, but I bonds carry no price risk, defer tax and cannot lose value. This article explains both, with the current numbers.

I bond rates in 2026 and how the composite rate is built

An I bond earns a composite rate that combines a fixed rate set when the bond is bought and an inflation rate reset every May and November from the change in the CPI-U ^[1]. The fixed rate stays with the bond for its full 30-year life; the inflation component changes every six months. The current fixed rate of 0.90% was set on May 1, 2026 and matches the November 2025 setting; it is below the 1.10% of May 2025, 1.20% of November 2024 and 1.30% of May 2024 ^[1]. The inflation rate of 1.67% for the current period is up from 1.56% in the prior period, which is why the composite stayed at 4.26% even though the fixed rate did not change ^[1].

The rules are fixed by TreasuryDirect: a $10,000 annual limit on electronic purchases per Social Security number, a $25 minimum, no redemption in the first 12 months, forfeiture of the last three months of interest if redeemed within five years, and interest that is exempt from state and local tax and deferred for federal tax until redemption or maturity at 30 years ^[2]. Interest may also be tax free if used for qualified higher education expenses ^[2].

How TIPS work and what they yield now

TIPS are marketable Treasury notes and bonds whose principal rises with inflation and falls with deflation, measured by the CPI ^[3]. They pay a fixed coupon set at auction twice a year on the adjusted principal, so the dollar payment rises with inflation, and at maturity the holder receives the adjusted principal or the original principal, whichever is greater ^[3]. Terms are 5, 10 and 30 years, the minimum purchase is $100, and interest plus any increase in principal is federally taxable each year but exempt from state and local tax ^[3].

Because TIPS trade in the market, their real yield moves daily. The table shows the Treasury's par real yield curve on August 26, 2026, along with the nominal yields on the same day ^[4][5].

The break-even column is the inflation rate at which a TIPS and a nominal Treasury of the same term deliver the same return. With CPI inflation running at 3.3% in the 12 months to July 2026, according to the CPI series on DataPorium's economic metrics page ^[6], TIPS bought at a 2.2% break-even come out ahead if inflation merely stays where it is. Real yields have also risen: the 10-year TIPS yielded 2.25% on July 1 and 2.34% on August 26 ^[4].

Comparing the real rates directly

The I bond's fixed rate is its real yield. At 0.90% it is 1.16 percentage points below the 5-year TIPS and 1.44 below the 10-year TIPS. Over 10 years on $10,000, that gap compounds to roughly $1,500 of extra real return for the TIPS holder. The I bond gives up that return in exchange for four things: no price risk (a TIPS sold before maturity can lose money if real yields rise), a floor of zero on the composite rate even in deflation, federal tax deferral, and the simplicity of a savings bond.

I bonds vs TIPS: which one fits which job

• Emergency reserve beyond the first year. I bonds, because they cannot lose value after the 12-month lockup and the three-month penalty ends after five years ^[2]. The $10,000 annual cap limits how fast the reserve can be built.
• Retirement income ladder. TIPS, because they can be bought in any amount in $100 increments and matched to future spending years, and a 30-year real yield of 2.92% is far above the I bond's 0.90% ^[3][4].
• Taxable account. I bonds defer federal tax for up to 30 years; TIPS generate taxable income each year on both the coupon and the inflation adjustment to principal, which is why many investors hold them in IRAs ^[2][3].
• Rising real yields. A new I bond each period captures the latest fixed rate without any loss on the old one; a TIPS bought earlier shows a paper loss when real yields rise, although it still pays its full real return if held to maturity.

The 4.26% composite on an I bond and the 4.37% to 5.18% nominal yields on Treasuries look similar today, but they are different promises. The nominal Treasury pays 4.51% for 10 years regardless of inflation; the I bond pays 0.90% plus whatever inflation turns out to be. If inflation averages 3.3%, the I bond delivers about 4.2%; if it averages 2%, about 2.9%; if it spikes to 6%, about 6.9%. Savers who want a hedge, not a bet, choose the inflation-linked version and accept the lower fixed component.

Inflation protection as a saving discipline

Both instruments exist because inflation is the quiet tax on savers. At the 3.3% pace of the past year, cash that earns nothing loses a third of its purchasing power in about 12 years. A saver who takes responsibility for that risk can neutralize it with a small allocation: the $10,000 I bond limit per person per year, plus a TIPS ladder inside a retirement account, keeps a portion of savings tied to the price level without depending on the Federal Reserve hitting its 2% target. Neither product builds wealth on its own at a 0.9% to 2.9% real return, so the rest of a long-horizon portfolio still belongs in productive assets. What they do is make sure the safe portion is actually safe in real terms.

TIPS pay 2.06% to 2.92% above inflation and I bonds pay 0.90% above it, so TIPS win on yield while I bonds win on simplicity, tax deferral and freedom from price risk.

Key takeaways

• I bonds issued May through October 2026 pay 4.26%, from a 0.90% fixed rate and a 1.67% semiannual inflation rate ^[1].
• TIPS real yields on August 26, 2026: 2.06% at 5 years, 2.34% at 10 years and 2.92% at 30 years, with break-even inflation of 2.2% to 2.3% ^[4][5].
• I bond rules: $10,000 electronic limit per year, 12-month lockup, three-month interest penalty inside five years, federal tax deferred, state tax exempt ^[2].
• TIPS rules: $100 minimum, 5-, 10- and 30-year terms, principal adjusts with the CPI, never repaid below original principal, taxed annually ^[3].
• With CPI inflation at 3.3% and break-evens near 2.2%, inflation-linked Treasuries beat nominal ones if inflation simply stays where it is ^[6].

Frequently asked questions

What is the I bond rate right now?

I bonds issued from May 1 to October 31, 2026 earn a 4.26% composite rate: a 0.90% fixed rate for 30 years plus a 1.67% semiannual inflation rate ^[1].

Are TIPS better than I bonds in 2026?

On real yield, yes: 10-year TIPS pay 2.34% above inflation versus the I bond's 0.90% fixed rate. I bonds are better for tax deferral, small amounts and money that must never show a loss ^[1][4].

How much can I invest in I bonds per year?

Up to $10,000 in electronic I bonds per calendar year per Social Security number, with a $25 minimum purchase ^[2].

Can TIPS lose money?

Held to maturity, no: the Treasury repays the inflation-adjusted principal or the original principal, whichever is greater. Sold before maturity, a TIPS can trade below its purchase price if real yields have risen ^[3].

Sources & References

1. [1] TreasuryDirect: I bonds interest rates
2. [2] TreasuryDirect: I bonds
3. [3] TreasuryDirect: Treasury Inflation-Protected Securities (TIPS)
4. [4] U.S. Treasury: Daily Treasury Par Real Yield Curve Rates, August 2026
5. [5] U.S. Treasury: Daily Treasury Par Yield Curve Rates, August 2026
6. [6] DataPorium Economic Metrics (CPI)