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"If the US enters a period of deflation, would I-Bonds be a reasonable vehicle to park our money?"


"I Bonds even protect you from the effects of deflation"


So who's right, Lokicious or the US Treasury? It depends on how you look at the question.

If I own a T-Bond paying 5%, and you own an I-Bond with a similar yield, and inflation drops to -2%, The I-Bond is going to net you right around nothing, while the T-Bond will still be paying 5%. In this case the T-Bond offered better deflation protection; Lok's point.

On the other hand, let's say inflation is -10% and you want to make a fixed income investment. A bond (newly purchased), stock, or real estate investment might return -5%, while an I-Bond will never yield < 0%. This is what the treasury means when it says I-Bonds can protect you against inflation.

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