Series I bonds (the I stands for inflation) are all the rage right now because of their currently high yields in an otherwise low-yielding savings environment. But before you tap into your home equity line of credit to max out your I bond purchases, you need to understand the mechanics of how I bonds work. What is an I bond? An I bond is a bond issued by the US government on which you earn interest at a rate tied to inflation and guaranteed by the federal government. If you buy an I bond today (June 2022), you will earn 9.62% interest, which is tied to the Consumer Price Index (CPI-U). The bond earns interest for up to 30 years. You can also defer paying federal tax on the interest until you redeem (cash in) the bond, and there is no state or local tax on the interest.