What type of bond is issued by the U.S. Treasury to protect investors from inflation or purchasing power risk?

The I-bond is specifically designed to protect investors from inflation by adjusting its interest rate based on the inflation rate. This bond is issued by the U.S. Treasury and is linked to the Consumer Price Index (CPI), which measures inflation. The interest earned on I-bonds consists of a fixed rate that remains constant throughout the life of the bond and a variable rate that is recalculated every six months based on inflation data. This combination ensures that the purchasing power of the investment is maintained over time, making I-bonds an attractive option for investors concerned about inflation.

In contrast, Series HH bonds are fixed-rate bonds that do not offer the same inflation protection, as their interest rate does not change with inflation. Revenue bonds are issued by municipalities to finance specific projects and are backed by the revenue generated from those projects, not directly tied to inflation. IDR bonds generally refer to bonds related to international debt restructuring and do not provide inflation protection. Thus, the I-bond stands out as the only option specifically meant to combat purchasing power risk through its inflation-adjusted interest rate structure.