Inflation-Linked Savings Bonds (I Bonds)

AAA

DEFINITION of 'Inflation-Linked Savings Bonds (I Bonds)'

U.S. government-issued debt securities similar to regular savings bonds, except they offer an investor inflationary protection, as their yields are tied to the inflation rate.

INVESTOPEDIA EXPLAINS 'Inflation-Linked Savings Bonds (I Bonds)'

Available directly from the U.S. Treasury, these debt securities are an exceptionally low-risk investment suitable for the most risk-averse investor; they have virtually zero default risk and inflationary risk.

While relatively risk-free assets such as these usually offer some of the lowest rates of return, it is important to note that I Bonds are usually exempt from income tax. They therefore provide a more attractive after-tax return.

RELATED TERMS
  1. Government Bond

    A debt security issued by a government to support government ...
  2. Yield

    The income return on an investment. This refers to the interest ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise ...
  4. Inflationary Risk

    The uncertainty over the future real value (after inflation) ...
  5. Bond

    A debt investment in which an investor loans money to an entity ...
  6. U.S. Treasury

    Created in 1798, the United States Department of the Treasury ...
Related Articles
  1. Bonds & Fixed Income

    Savings Bonds For Income And Safety

    Bonds offer undeniable benefits to investors, including safety and tax advantages.
  2. Bonds & Fixed Income

    Curbing The Effects Of Inflation

    Your investments suffer when general price levels rise. Learn how you can control the damage with IPSs.
  3. Options & Futures

    Introduction To Inflation-Protected Securities

    Inflation is an enemy to investors - except to those who invest in IPS, which guarantee a real rate of return with no credit risk.
  4. Taxes

    Taxation Rules For Bond Investors

    Several factors affect the taxable interest that must be reported. Learn more here.
  5. Home & Auto

    The Bear On Bonds

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  6. Retirement

    Hedge Your Bets With Inflation-Linked Bonds

    ILBs such as TIPS and I-Bonds allow investors to curb the corrosive effects of inflation and increase portfolio diversification.
  7. Investing

    What are "I Bonds" and how can I buy them?

    The term "I Bond" is industry lingo for inflation-linked savings bonds issued by the U.S. Treasury. You've probably heard of investment opportunities in government-issued securities before - ...
  8. Options & Futures

    Writing Covered Calls On ETFs

    The strategy of writing covered calls on ETFs can limit your losses and hedge risk, but they cap your upside potential.
  9. Bonds & Fixed Income

    What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields move in opposite directions.
  10. Taxes

    Why should I keep records on my tax-exempt bond transactions?

    Keep your purchase records on all investments, including tax-exempt bonds. Though the interest is tax-free, you may owe taxes if you sell your bond for a gain.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center