Surging demand for "inflation-proof" I-bonds crashes a Treasury Department website

So many investors are rushing online to buy Series I savings bonds and lock in a rate of 9.62% ahead of an October 28 deadline that a U.S. Treasury Department website selling the securities crashed. The bonds are considered a low-risk hedge against inflation. 

The TreasuryDirect website froze up on Wednesday, while some users on social media reported delays accessing the service and getting their I-bond orders processed. The delays could prevent some investors from completing their purchases before this week's deadline.

The Treasury Department on Friday said that it will close the TreasuryDirect website at midnight tonight through 11:59 p.m. Eastern on Sunday, October 30, to ensure it can process the surge in I-bond purchases it has received this week. On Friday alone, Americans bought $710 million worth of I-bonds, the agency said. 

The TreasuryDirect website will reopen for purchases on October 31, when I-bond purchasers will receive a rate that will be published by the agency on November 1. Analysts expect that rate to be considerably lower, at around 6.5%.

With the deadline fast approaching, the Treasury Department is opening more I-bond accounts each day than it typically creates in a year, according to an agency official. The website, TreasuryDirect, has been around for two decades and wasn't built for the spike in traffic it's receiving this week, the official added. Treasury has tripled its capacity to handle the surge, but the site is still experiencing slowdowns, the agency said.

I-bonds are typically a niche investment that provide a return based on the Consumer Price Index for All Urban Consumers, an inflation gauge. Because U.S. inflation was at or below 2% for years, they hadn't provided an attractive return compared with stocks and other investments. 

That changed as inflation has soared, pushing up the guaranteed rate of return on I-bonds this year to 9.62%. Because the Treasury Department resets the rate for I-bonds every six months, the next adjustment will occur next month. At that point, the I-bond rate will decline to about 6.5% — still respectable, but less eye-popping than the current 9.62% rate. 

Any bonds issued before October 31 will yield 9.62%, but Treasury has said that people should order by October 28 to allow for the several days it typically takes to issue a bond, which is sparking the rush on the Treasury Direct website. 

I-bonds come with some significant limitations. First, one person can buy only up to $10,000 worth of bonds a year, with an additional $5,000 allowed if they use a tax refund for the purchase. For married couples, that limit doubles. Parents can also buy I-bonds for their children (under age 18), although they need to set up separate accounts for each kid.

I-bond buyers also aren't allowed to redeem them for the first year. After that, you can sell the bond, but that will forfeit the last three months of interest. After five years, investors can sell with no restrictions. 

In:
• United States Department of the Treasury
• Inflation

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