I bonds and Treasury bills are both short-horizon ways to lend to the US government, and both carry its full faith and credit, but they reward different patience. A bill locks in a yield for weeks or months and can be sold any day. An I bond pays a rate that follows inflation, ties your money up for a year and charges interest if you leave before five. In early November 2026 the I bond's headline rate was higher, which makes the timing math decisive. Below are a feature table, break-even calculations for 12 months and five years, the tax differences and a way to rerun the numbers with today's yields. For every other Treasury product, see the Treasuries hub.
Which pays more right now, I bonds or T-bills?
For the next six months I bonds pay more: 5.51% against a 4.36% investment yield on the 52-week bill on October 30, 2026.
Shorter bills paid a little less that day: 4.08% for 13 weeks and 4.25% for 26 weeks, measured as investment yields. Those figures are roughly comparable with an I bond rate because both are annualized yields on the money you put in; a bill's discount rate is not, as the guide to discount rate vs investment yield explains.
The headline numbers hide a difference in how long each rate lasts. A bill's yield is fixed until it matures. The I bond's 5.51% applies only to its first six months; after that the bond earns its 1.40% fixed rate plus whatever inflation rate Treasury announces on May 1, 2027. The I bond also arrives with a lockup that a bill does not have, and that lockup, not the rate, decides most 12-month comparisons. The I bonds guide shows how the composite rate is built, and the Treasury bill guide covers bill pricing.
How do I bonds and T-bills compare?
The two differ most on lockup, purchase limits and when federal tax is due, as the table shows.
| Feature | I bonds | Treasury bills |
|---|---|---|
| Rate in early November 2026 | 5.51% for six months, then 1.40% plus a new inflation rate | 4.08% (13-week) to 4.36% (52-week) investment yield on October 30 |
| How long the rate is fixed | Six months at a time | Until the bill matures |
| Terms | Earns for 30 years | 4, 6, 8, 13, 17, 26 and 52 weeks |
| Earliest access | 12 months after the issue date | Any business day, by selling through a broker |
| Cost of leaving early | Last 3 months of interest if cashed before 5 years | Market price, which can be a little above or below cost |
| Purchase limit | $10,000 per person per calendar year | $10 million per auction, noncompetitive |
| Minimum | $25, then to the penny | $100, in $100 steps |
| Federal tax | Deferred until you cash the bond, or yearly by choice | Due in the year each bill matures |
| State and local tax | Exempt | Exempt |
| Inflation protection | Rate resets with the CPI-U every six months | None; each new bill pays the rate of the day |
| Where to buy | TreasuryDirect only | TreasuryDirect, brokers, funds |
Two cells need context. Selling a bill early means using a broker; bills bought in TreasuryDirect must stay there for 45 calendar days before they can be moved. And Treasury waives the I bond's 12-month lockup only in limited cases, such as for owners hit by certain federally declared disasters.
When do I bonds beat T-bills over 12 months?
Over exactly 12 months, a 52-week bill bought on October 30, 2026 comes out ahead unless the I bond's May 2027 rate rises above about 6.46%.
Worked example: 12-month break-even on $10,000
- 52-week bill at a 4.17% discount: price 100 − 4.17 × 364 ÷ 360 = 95.78367 per $100, so $10,000 returns about $10,440 after 364 days
- I bond bought in November 2026 and cashed on November 1, 2027: six months at 5.51%, three months at the May 2027 rate, and months 10 to 12 forfeited
- If the May 2027 rate stays at 5.51%: $10,000 × 1.02755 × 1.02755 to the power 0.5 = about $10,416, so the bill is about $24 ahead
- Break-even: 1.02755 × (1 + r ÷ 2) to the power 0.5 = 1.04402, which gives r = 6.46%
- With the 1.40% fixed rate, 6.46% needs six-month inflation of about 2.51%, a March 2027 CPI-U of about 345.41 against 336.940 in September 2026
The same test across a range of May 2027 rates, with the bill fixed at about $10,440:
| May 2027 composite rate | Six-month inflation behind it | I bond value if cashed at 12 months | Result |
|---|---|---|---|
| 3.41% | 1.00% | $10,363 | Bill ahead by $77 |
| 4.42% | 1.50% | $10,388 | Bill ahead by $52 |
| 5.51% | 2.04% | $10,416 | Bill ahead by $24 |
| 6.44% | 2.50% | $10,440 | About even |
One quirk helps the I bond. Interest starts on the first day of the purchase month, so a bond bought on November 24, 2026 is dated November 1 and can be cashed on November 1, 2027, about 11 months and one week later. The dollar result is the same as in the table, but it arrives sooner than the bill's 364 days.
How do I bonds compare with T-bills over five years?
Over five years the I bond comes out ahead if inflation averages more than about 2.8% a year after its first six months.
The comparison assumes bills rolled at 4.36% for the whole period, compounding twice a year, which turns $10,000 into about $12,407. The I bond earns 5.51% for six months, then 1.40% plus a steady inflation rate. Both are before tax.
| Average inflation after month 6 | I bond composite rate | I bond after 5 years | Bills rolled at 4.36% | Ahead |
|---|---|---|---|---|
| 1% | 2.41% | $11,445 | $12,407 | Bills |
| 2% | 3.41% | $11,964 | $12,407 | Bills |
| 2.81% | 4.23% | $12,407 | $12,407 | Neither |
| 3% | 4.42% | $12,510 | $12,407 | I bond |
| 4% | 5.43% | $13,077 | $12,407 | I bond |
| 5% | 6.44% | $13,667 | $12,407 | I bond |
Set that 2.81% break-even against two market readings from the same week: the 5-year breakeven inflation rate implied by TIPS was 2.46 points on October 30, 2026, and the CPI-U had risen 3.74% in the 12 months to September 2026. Neither is a forecast, and bill yields will not stay at 4.36% for five years. If the Federal Reserve cuts its target range, now 3.75% to 4.00%, rolled bills earn less and the I bond's case improves; if inflation stays high, both the I bond rate and new bill yields tend to rise. The guide to Fed decisions and bill rates explains that link.
How do the lockup and penalty change the choice?
The lockup matters more than the rate for money you might need soon, because an I bond cannot be cashed at all in its first year.
After year one, an I bond can be cashed in any month, but until year five the last three months of interest are forfeited. At a steady 5.51%, $10,000 cashed at 18 months returns about $10,703 instead of $10,849, a cost of about $146. A bill has no such charge: hold it to maturity and you receive face value, or sell it through a broker and accept the market price, which for a 52-week bill moves only about 1% for a one-point change in yields.
That difference shapes where each one tends to fit. Money that might be needed within a year sits more naturally in bills, which can be rolled automatically or arranged in a T-bill ladder so part of the cash comes back every few weeks; the guide to what happens when a T-bill matures covers rollovers. Money that can stay put for a year or more can tolerate the I bond's rules. The guide on where to keep an emergency fund compares the wider set of options.
How are I bonds and T-bills taxed?
Both are free of state and local income tax, but bill interest is federally taxed when each bill matures, while I bond tax can wait.
IRS Publication 550 says bill interest, the gap between the price you pay and the face value, is generally reported when the bill is paid at maturity, even if you roll the proceeds into a new bill. A bill bought in November 2026 that matures in 2027 is taxed in 2027. Rolling bills for five years therefore means a tax bill every year.
I bond interest is reported, by default, in the year you cash the bond or it reaches 30-year maturity. That deferral is worth something: at a 24% federal rate, bills rolled at 4.36% grow $10,000 to about $11,786 after tax over five years, and the I bond's break-even inflation rate falls from about 2.81% to about 2.71%.
The higher-education exclusion can make I bond interest fully tax-free for owners under the income limits, which bills cannot match. Because both escape state tax, the choice between them does not depend on where you live, although both gain against bank deposits in high-tax states. The T-bill tax guide covers reporting and Form 1099-INT. Tax rules change, so confirm your situation with a tax professional.
How do you rerun the math with today's rates?
Bill yields change daily, so plug the latest bill yield and the current I bond rate into the same two tests.
| Term | Discount rate | Investment yield | Price per $1,000 | Yield vs a month ago | Yield vs a year ago |
|---|---|---|---|---|---|
| 4-week | 3.91% | 3.98% | $996.96 | +0.07 pts | 0.00 pts |
| 6-week | 3.91% | 3.98% | $995.44 | -0.04 pts | +0.04 pts |
| 8-week | 4.00% | 4.08% | $993.78 | +0.02 pts | +0.11 pts |
| 13-week | 3.99% | 4.08% | $989.91 | -0.05 pts | +0.23 pts |
| 17-week | 4.07% | 4.18% | $986.55 | -0.05 pts | +0.31 pts |
| 26-week | 4.11% | 4.25% | $979.22 | -0.09 pts | +0.43 pts |
| 52-week | 4.17% | 4.36% | $957.84 | -0.18 pts | +0.66 pts |
Use the investment yield column, not the discount rate, and pick the term that matches your horizon. Then:
- Price the bill in the Treasury bill calculator to get its dollar return on your amount.
- For a 12-month test, value the I bond as six months at the current composite rate plus three months at an assumed next rate, because the last three months are forfeited.
- For a five-year test, compound the bill yield for 10 half-years and the I bond at its first-period rate, then at the fixed rate plus your inflation assumption; the compound interest calculator handles both.
- For taxes, shrink each year's bill interest by your federal rate and tax the I bond's interest once, at the end.
The live T-bill rates page adds history and auction results.
Can you combine I bonds and T-bills?
Yes, and the rules make a split by time horizon natural: bills for money needed within a year, I bonds for longer.
Worked example: Splitting a $30,000 cash reserve
- $10,000 in I bonds, the yearly limit for one person
- $20,000 in a ladder of four 13-week bills worth $5,000 each, bought about three weeks apart so one rung matures roughly every three weeks
- After 12 months the I bond portion becomes cashable, at a cost of three months' interest, so the ladder could shrink if the I bond rate stays attractive
- A couple has two I bond limits, $20,000 a year in total
This is an illustration of the mechanics, not a recommended mix. The I bonds vs TIPS comparison covers the other inflation-linked option, and the EE bonds guide covers the fixed-rate savings bond.
What are the risks of I bonds and T-bills?
I bonds risk a falling rate on locked-up money, while T-bills risk trailing inflation and earning less each time they roll over.
- I bond rate cuts. If six-month inflation slowed to 0.50%, a November 2026 bond would earn about 2.41% from May 2027 with no way out until November 2027.
- I bond access. The 12-month lockup, the three-month penalty and the $10,000 cap all limit flexibility, and the bonds can only be managed in TreasuryDirect.
- Bill reinvestment risk. Each rollover happens at the new rate. A Fed rate cut flows into bill yields within weeks.
- Bill inflation risk. Bills carry no inflation adjustment. After a 22% tax, a 4.08% bill trailed 3.74% inflation, as the real returns guide works out.
- Bill price risk. Small, but a bill sold before maturity after yields rise fetches less than face value.
Both are backed by the full faith and credit of the US government, which addresses default, not these rate and inflation risks; the guide to whether Treasuries are risk-free and the overview of types of investment risk cover the rest. The break-even figures above rest on stated assumptions and are not forecasts. To cash I bonds you already own, see how to cash savings bonds.