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I Bonds Rates Will Increase To 9.62% (May 2022 Update)

I Bonds rates are expected to skyrocket when they adjust in May and it’s time to pay attention to them again. This is the single best investment you can make this year and safer than any other alternatives.

Never heard of an I Bond before? Don’t worry, you’re not alone. They haven’t been popular for 20 years, but here’s why I Bonds will become a hot trend this year.

Ninja Update 4/29/22: I Bonds purchased now will count as May purchases and immediately get the 9.62% rate. Purchases no longer gets the 7.12% + 9.62%. Instead you’ll get the 9.62% rate for 6 months and then an unknown rate for the following 6 months. This is still a great opportunity to lock in a high return with zero risks.

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I Bonds Overview

It seems like inflation is everywhere these days. Soaring gas prices, sky-high construction costs, and expensive Uber rides. There’s a lot to complain about!

But complaining doesn’t get you anywhere. Instead, consider how to make money as inflation heats up with I Bonds.

What are I Bonds?

I Bonds, short for Series I Savings Bonds, are inflation-indexed U.S. savings bonds. It’s designed to protect the value of your cash from inflation.

I Bonds are a unique, very low-risk investment backed by the U.S. Treasury with a holding period from 12 months to 30 years. Think of Series I Bonds like bank certificate of deposits (CDs) that are liquid after 12 months.

You can’t redeem an I Bond within the first 12 months and if you cash it out before five years have passed, you’ll incur three months’ worth of interest as an early withdrawal penalty.

It earns a composite rate; one rate is a fixed interest rate determined at the time you buy an I Bond and the other rate is a variable inflation rate that gets adjusted for inflation every six months. Combine the rates together and you get the composite rate (which is the total rate you earn interest on).

The variable rate essentially guarantees I Bond buyers that they’ll never lose the value of their money because of inflation.

I know, I know – this isn’t as thrilling as showing off your free cryptocurrencies, but you’ll make a great deal more money now with Series I Bonds than parking your cash in a traditional savings account.

Why didn’t you recommend I Bonds before?

Because I Bonds haven’t been relevant for 20+ years. Inflation has been so low for the past couple of decades that there were better places to safely invest your cash for a higher return.

When I Bonds first came out in 1999, they were offering a whopping 7% composite rate. Since then, I Bonds rates have sunk to the bottom of the ocean floor with a fixed interest rate of 0% and a mediocre inflation rate.

However, the next inflation adjustment will be in May 2022, and that’s what everyone’s excited about!

I Bond Rates for November 2021 – April 2022

Inflation numbers released at BLS.gov allowed us to predict what I Bonds rates will be starting in November 2021.

I say predict because we can only calculate what the variable inflation rate will be, but not the fixed interest rate. Remember that I Bonds is a composite of the two rates.

Ninja Note 11/1/21: The interest rate is now confirmed at 7.12% if you buy between November 2021 and April 2022.

New Variable Inflation Rate

Consumer Price Index for Urban Consumers, or CPI-U for short, was 274.310 in September 2021 compared to a CPI-U of 264.877 in March 2021.

274.3/264.9 = 1.0356, or a semi-annual increase of 3.56%. So…

Semiannual inflation rate = 3.56%
Fixed interest rate = currently 0% (determined separately)

Using the formula below, we can determine the minimum rate an I Bond buyer would get starting in November 2021:

Total rate = Fixed rate + 2 x Semiannual inflation rate + (Semiannual inflation rate X Fixed rate)
Total rate = 0.000 + 2 x 3.56 + (3.56 x 0)
Total rate = 7.12%

November 2021 – April 2022 I Bond Rates

If you buy I Bonds between November 2021 and April 2022, you’ll get at least a 7.12% return plus whatever the new fixed interest rate will be for the first six months.

The fixed rate formula is unknown, but it’s linked to the yield of short-term Treasure Inflation-Protected Securities (TIPS). Short-term TIPS are near zero and therefore the fixed interest rate for I Bonds will likely stay at 0%.

Ninja Note 11/1/21: The fixed interest rate is set again at 0%, which means the interest rate on I Bonds is 7.12% if you buy before the end of April 2022.

Every six months, your I Bonds rates will adjust. The fixed rate will always stay at the same rate at the time of your purchase, while the variable rate will be based on inflation changes.

The fixed rate was as high as 3.60% back in May 2000. Those lucky I Bond holders would now earn an incredible 10.72% for the six months starting in November 2021 (3.60% fixed + 7.12% variable).

What if I buy I Bonds before the rate change?

If you buy I Bonds before the end of October 2021, you’ll be guaranteed a total rate of 3.54% for the next six months (based on the previous six months formula).

After that time period, your total rate will be at least 7.12% for the following six months (based on November 2021 rate adjustments).

In terms of the absolute worse-case scenario, where you:

  • buy the I Bond on October 31, 2021
  • sell the I Bond on October 1, 2022 (hold the I Bond for the minimum 12 months and incur a three-month interest penalty)

You’ll earn a 3.87% annualized return for an 11-month holding period.

You may be asking why 11 months and not 12 months. It’s because in this scenario, you bought the I Bond at the end of October. Even though you only held the I Bond for one day that month, you earn the entire month’s worth of interest.

It’s a near little trick to buy at the end of a month and gain the entire month’s interest.

Now let’s say you held that exact bond, but sold it in January 1, 2023 instead. In this case, you’d earn a 4.57% annualized return for a 14-month holding period.

In either situation, this is much higher than any available money market or CD rate out there today.

Should I buy now or wait?

There’s no wrong choice as both the old and new rates are great compared to other equivalent alternatives. Find me another savings instrument that’s safe as a government bond and will offer more than a 3.87% return over 11 months.

You can’t.

I Bonds also have special benefits compared to a money market account or CD, like:

  • Exemption from state income taxes
  • Redemption for higher education is exempt from federal taxes
  • Tax deferral until bond redemption
  • Inflation protection

How to Buy I Bonds

You used to be able to buy savings bonds by simply walking into a bank, but that’s not the case anymore. The government no longer issue bonds in paper form (besides tax refunds – more on that below), you can only buy them in electronic form.

You can buy up to $10,000 in I Bonds each calendar year through an electronic TreasuryDirect account. Open an account at TreasuryDirect.gov to do so. The minimum purchase amount is $25.

The $10,000 limit is per person, not per household. In other words, a couple can buy a total of $20,000 in I Bonds per year. A family with children can buy another $10,000 per child as long as they have a Social Security Number.

Additionally, you can buy an extra $5,000 in paper I Bonds if you have a tax refund when you file your federal income tax return. Tax software like TurboTax will offer you this option if you’re due a refund. If you do your taxes by hand, you need to complete IRS Form 8888.

The minimum purchase amount is $50 when buying through a tax refund (Paper I Bonds come in denominations of $50, $100, $200, $500, and $1,000).

Most people don’t get a tax refund of $5,000 – at least not if you’re doing your taxes right.

In instances like this where you want to buy more I Bonds and therefore want a bigger tax refund, a strategy you can use is to purposely pay more in taxes throughout the year than you actually owe.

Ninja Note: If you want to purchase more than the $10,000 annual limit, I wrote a detailed post on all the ways to buy more I Bonds.

I Bond Rates for May 2022 – October 2022

With March 2022 inflation readings in the books, it looks like I Bonds will earn a minimum of 9.62% starting in May 2022 (and could be even higher if the fixed interest portion is revised).

(Image from TipsWatch)

This means I Bonds purchased before the end of April will earn 7.12% for the first six months of ownership and then at least 9.62% for the following six months, guaranteeing a one-year return of 8.37%.

THIS IS CRAZY. We all know inflation is high and I Bonds are the perfect investment to counterbalance the lost in purchasing power of the dollar.

In my humble opinion, we’ll never see a rate this high again. The current 7.12% interest rate was already a record high for I Bonds, which was first made available in September 1998. Starting in May 2022, the new rate of at least 9.62% will hit an all-time record.

The Bottom Line

Personally, I bought $20,000 worth of I Bonds at the end of October 2021 for myself and my significant other. At the time, I wanted to lock in the previous six month rate 3.54% and the upcoming six month rate 7.12%.

I plan to buy an additional $20,000 before the end of April 2022 to lock the rate now (7.12%) and the expected rate increase next month (9.62%). I Bonds are ultra-safe investments and this blended rate is way too good to pass up on.

The rest of my available money outside of investments is directed to chasing the best bank bonuses and earning interest in stablecoins (a less volatile cryptocurrency).

Make sure you have an adequate emergency fund parked at a high-yield savings account before exploring all the different ways to make your money work harder for you.

86 thoughts on “I Bonds Rates Will Increase To 9.62% (May 2022 Update)”

  1. Someone was telling me in a rather lengthy and somewhat wordy fashion to go ahead and buy my 10K worth of i-bonds in April. Said I’d be better off folding the old rate with the May rate.
    At some point during our discourse i said i would cash in at 15 months taking the withdrawal penalty into consideration.

    Reply
  2. Married couple here filing jointly with two children, one child 22 other 25.
    If we want to go forth to the max, how many I bonds $10k could be acquired three or four and do we all need to acquire our own accounts?

    Reply
  3. Hi,
    Great article. My husband and I maxed out and bought $10000 each month in November and December 2021 and again $10,000 each month in January and February 2022.
    My question is a person or joint filers have a choice of paying federal tax now or later when bond is cashed. There is no state or local tax on the total composite gain. Does it make more sense to pay taxes now (if it doesn’t change tax bracket) before taxes eventually go higher? I’m feeling like that is the right thing to do and save a major tax bill later. I realize once you do it a certain way, for the bond’s life, you are committed to whichever way you decided. I’m just trying to plan for 2022 taxes..lol. Thanks.

    Reply
    • Hi Kris, thank you!

      Regarding your question, reporting interest income each year instead of deferring it could be a good move for someone with little or no taxable income and expect it to be significant higher in the future.

      I’m not sure what tax bracket you’re in or expect to be in later so I can’t advise a straightforward yes or no. It’s also hard to predict whether the tax brackets will go higher or lower.

      This strategy is clearer in specific scenarios, like if the savings bonds are held in a child’s name. They are most likely paying taxes at a lower rate today than in the future as the bond matures.

      Reply
  4. I missed the April 30, 2022 deadline. It is now May 2nd. Should I buy I bonds now or wait until the end of the month.

    Reply
    • There’s no reason to wait until the end of the month unless you’re earning interest on the money you intend to invest in i bonds, and it’s worth waiting most of the month to continue to get that interest. This is a highly unlikely scenario.

      Reply
  5. Awesome of you to share your knowledge and put your time as well to do it !
    I wish I had known about this I-Bond 20 years ago. This thing appears to be like one’s own Social Security system, or an augment to SS, at retirement.
    If I understand it correctly, if my wife and I were to put 20k a year into it for 20-25 years then compounded at, or close to, retirement we’ll have a pretty sizeable, if not double, amount to withdraw from for along time thereafter. So, SS+ I-Bond draw.

    I’ve just opened an account with Treasury Direct. It is letting me add another registration where I was able to add my wife’s SS# too. Not sure at this point if I’ll be able to add 10k for each registration, or if my wife needs her own account. Will find out soon 🙂

    Thanks Much for your site. Its worth sharing and recommending !!

    Reply
  6. If the Fed decides to change the current fixed rate of 0%, when could that take place?
    At any time or only once a year?

    Reply
  7. Can I buy Savings I bonds for spouse and myself for $10000 each for this calendar year and also each of us buy $10000 as gift to one another and deliver it next year to maximize the gain and avoid yearly limit?

    Reply
    • Yes, that’s a potential strategy! The only caveat is that the gift has to be “received” in a different year.

      For example, John and Jane are a married couple and each of them has already bought $10,000 in I Bonds for 2022. John can buy an additional $10,000 (or whatever amount) during 2022 with the gift being fully executed (“received”) to Jane in 2023. Since John bought the I Bonds in 2022, the savings bonds will begin accruing interest and counting down the 12-month lock-up period at the time of purchase.

      Keep in mind if Jane elects to receive the bonds in 2023, she has to deduct that bond amount against her annual limit.

      Reply
      • So, Jane (and John) can defer receiving/execution of their gifts to 2024 and buy another 10k each in their own accounts on 1/1/23?
        i.e. have a total of 40k begin to earn the current rate of interest right now and add another 20k in Jan 2023?

        Reply
        • That’s correct, but I wouldn’t perpetually stack more and more I Bonds – maybe a few years at most.

          Because what if in the next several years, the U.S. experiences significantly lower inflation levels? The variable rate would go down by the same margin. In that situation, you don’t want years of bonds that you need to unload $10,000 at a time.

          Reply
  8. I have a custodial savings account for a grandson. Can I remove money from that account and purchase an I Bond in his name? He is nine years old.

    Reply
    • Yes to both. You can withdraw money from a custodial account as long as the funds go toward the benefit of the grandson. You can also purchase savings bonds under the name of the grandson.

      Reply
  9. I bought two $5000.00 I bonds April of 2009
    One for me and one for my wife
    What are they worth
    What are they earning
    Should I sell them and buy new I bonds
    Do I have to sell them after thirty years of holding
    They are paper bonds should I set them up differently
    I intend to get more now, today is Friday April 29, 2022, should I wait until later in May to get them as the interest amount will be the same

    Reply
    • You can go here to calculate the value of your paper bonds. They’re earning the same variable rate as every active I Bond, currently at 9.62%.

      You don’t need to sell them as they’re still earning interest; they will just no longer accrue additional interest after 30 years. You can (and probably should) buy more this year to take advantage of this high rate of return. There’s no “set up” for paper bonds. To redeem them, go to your local bank.

      Electronic I Bonds behave a bit differently – when bonds in a TreasuryDirect account stop earning interest, they’re automatically cashed and the interest earned is reported to the IRS.

      Reply
    • You have to name a second owner. That second owner becomes the beneficiary if you should pass away. Each I Bond holding allows only one second owner or beneficiary but not both at the same time. This second owner or beneficiary must be a person, not a trust or a charity. If you’d like to leave your I Bonds to multiple people after you die, you must make separate purchases and name a different person for each I Bond.

      Reply
  10. Correct me if I’m wrong, but I’m looking at the inflation component not as interest in the conventional sense, but as a gradual adjustment to the value of a bond. So buying in April captures the 7% increase set last fall, it just takes 6 months to collect the full adjustment amount. Then it guarantees the opportunity to collect the next full 9% expected adjustment. Waiting until May basically means leaving the first 7% adjustment on the table in return for a higher initial rate, but in the long run the bond will be worth less than one bought in April. Comments?

    Reply
    • No one knows for certain because none of us has a crystal ball. My opinion is that it will be very tough to match the blended annual rate of 7.12% and 9.62%, although inflation is unpredictable. Moreover, one day the fixed rate component may be higher than 0% again.

      Reply
    • We bought our i-bonds in April thinking along somewhat different lines however to collect the 7 point first then the May adjustment. Mostly to avoid the unknown upcoming in November. IDK who’s better off. Planning on going 15 months with things.

      Reply
  11. This is great info. Learning a lot here. My question is if I buy 10k today (4/25/22) can I not buy again until 4/25/23 or is it calendar year? Would I be able to buy another 10k in Jan of 2022 if the rates were still going strong locking in that rate for a new 6 month window? – Thanks!!

    Reply
    • Hey Jared! Happy you’re finding the site valuable. The $10k limit is per calendar year, so if you purchase the maximum amount today, you can buy more bonds starting January 1st of next year.

      Reply
  12. Hi, today is April 24th 2022. Can I buy on April 30th and qualify for 7.12%? Or is there a processing delay which will push my start date to early May 2022 even though I placed my order in late April 2022? Also, does April 30th being a weekend impact this?

    Reply
    • Feedback from other readers indicate that it takes one business day to process, so if you buy on Friday, it may take until Monday to execute. One person wrote that he ordered the bonds on Friday and it didn’t process until Monday (when a new month started). I’d do it a few days before just to err on the safe side.

      Reply
      • You are able to place your order in advance and specify the date that you wish the actual purchase to take place, as long as your account and funding source is set up.

        Reply
  13. Is the interest paid monthly and can that be sent to a checking account or does it have to stay within the bond for the full time? Thanks.

    Reply
  14. Today is 4-18-22 can i buy $10,000 worth of I bonds today and can I also buy $10,000 I bonds for my wife also and what would be my rates . thank you

    Reply
  15. Hello! Excellent and informative website. Quick question re: I bond purchase strategy. Would it make sense to purchase $5000 each, for my husband and I NOW, in April and then purchase an additional $5000 each in May? We have emergency funds sitting in a traditional savings account doing nothing and this total of $20,000 would not affect that.

    Reply
    • Thanks for the compliments, Liz! If I were in your position, I would purchase the entire limit before the end of April. Locking up 7.12% for six months and then 9.62% for the following six months is a clear win. If you wait, you’re gambling that the variable rate will be higher than 7.12% in the next rate adjustment.

      Reply
      • Thanks! Sharing your website with my friends and my daughter who is a grad student and just beginning her investing journey!

        Reply
  16. Is it worth taking penalty on traditional IRA that I have to start taking withdrawal on this year to be able to transfer all to I-bond?

    Reply
  17. If I cash out of the I bond after 12 months and before 5 years I will forfeit 3 months interest. My question is at what rate? Would it be the current 3 month interest rate or an average rate of your entire holding period? For example if inflation dropped to 0 and the bond had a 0 fixed rate and was paying 0 interest for the last 3 months, would the penalty be $0 ?

    Reply
    • If you redeem an I Bond within the first 5 years, you’ll lose your last 3 months interest. For example, if you redeem an I Bond after 24 months, you’ll receive the first 21 months of interest.

      So yes, if your fixed and variable interest rates happen to both be 0% for the last 3 months that you held the bond, your penalty wouldn’t be a penalty at all.

      Reply
    • Buy now. If you buy before May 1, you’ll earn 7.12% for six months and then 9.72% for the following six months. If you buy on May 1, the only thing you know for certain is receiving 9.62% for the first six months. Beyond that, you need to wait until November 2022 to see what the rate adjustment is.

      Reply
  18. I have an Ira that I need to start drawing off of this year. Would it be prudent to withdraw all now and put in I-bond now instead?

    Reply
    • If you don’t have the need for that money right now, I’d say so. There’s no sense in putting the cash in a savings account, money market, or CD when you can get such a high return with I bonds.

      Reply
  19. Thanks for all the great information. So no matter when you purchase a specific i bond, it will receive the initial rate for six months, followed by six months at the next declared rate, followed by six months at the next declared rate and so on . . . . right?

    Reply
    • You got it, Bill. Whatever the current interest rate is when you purchase the I Bond, you’ll earn that rate for six months and so forth. It’s exactly as you said.

      Reply
  20. Can a married couple file separate tax returns, so that each can use their ($5,000 limit) refund to buy a paper I-bond? This, instead of filing jointly, and being limited to $5,000 together.

    Reply
    • The $5,000 maximum is per tax return, not per person. So you can if you’re married filing separately, but check to see if the benefits outweigh the costs.

      If you’re married filing jointly, you still can buy only a maximum of $5,000 for both of you combined, not $5,000 for each of you. Details can be found on IRS Form 8888 instructions (page 3).

      Reply
  21. Can I use the bonds to pay for my child’s higher education expense (federal tax free) or does the bond have to be in his account and under his name?? Thank you

    Reply
    • It should be under your name and/or your spouse’s name. You can take the exclusion if all five of the following apply:

      1. You cashed qualified U.S. savings bonds in the same tax year for which you are claiming the exclusion.
      2. You paid qualified higher education expenses in that same tax year for yourself, your spouse, or your dependents.
      3. Your filing status is any status except married filing separately.
      4. Your modified adjusted gross income was less than the cut-off amount set by the Internal Revenue Service. This amount typically changes every year (see IRS Form 8815 for the current amount).
      5. You were 24 or older before your savings bonds were issued.

      Note: A bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or the child.

      Reply
  22. So, I am planning to buy more ibonds in 2022. I am a little confused. Let’s say I buy $10,000.00 in February. Would I get the 7.12% amount for 6 months or will it adjust at the end of April?

    Reply
    • You’ll get the 7.12% for six months. So if you bought in April, you’ll get that rate through September. In October, you’ll earn the adjusted rate set back in April.

      Reply
  23. Bought my bond a few days ago and understanding what I will be earning when is a bit confusing. But from your post and after reading a bunch on Treasury Direct it seems as follows:

    I bough a $10,000 bond Dec 23rd, the bond counts as if it were purchased on Dec 1. It will earn the 7.12% rate from Dec 1 to May 31. At that point the $10,356 that my bond is worth will earn whatever the new rate is.

    So if I bought a second bond $10,000 on Apr 25th the bond would count as if it were purchased on Apr 1 and the 7.12% rate would count from Apr 1 to Oct 31, meaning the bond would be valued $10,356 and then the new rate would apply for the next 6 mos.

    Is this right?

    The real question: The trade offs of buying earlier vs. later (between Jan 1st and Apr 30) are buying early allows you sell the bond earlier (without penalty 5 years later, or with penalty after 1 year). Buying later (in April) gives you insight as to the future rates (as they are announced at that point) while having to cash out later.

    Do I have a good understanding of the Tradeoffs?

    Reply
    • Exactly as you said, Julio.

      Good job on locking in your maximum savings bonds purchase this year. There’s no other safe financial instrument that comes close to this return.

      And since you bought $10,000 of I Bonds at the end of December, you’re technically getting more than 7.12% because you’ve only held it for 5 months while earning 6 months’ worth of interest.

      Reply
      • Sorry, I need a further clarification:

        Julio bought $10K worth Dec 23rd.
        His ROI Dec 1 – April 30 @ 7.12%
        His ROI May 1 – Oct 31 @ 9.62%
        His ROI Nov 1 – Future Fixed + Inflation Rate

        Julio bought another $10K worth April 25th
        His ROI April 1 – April 30 @ 7.12%
        His ROI May 1 – Oct 21 @ 9.62%
        His ROI Nov 1 – Future Fixed + Inflation Rate

        Is my understanding correct?

        Reply
        • Partially correct on the first purchase. The fixed rate component doesn’t adjust for existing bonds – only new bonds. The inflation rate component changes every 6 months, but the bonds purchased are also locked at each rate for 6 months regardless of when it was purchased during that rate window.

          This is more clear in the second purchase where Julio will earn 7.12% for 6 months before it readjusts to the current 9.62% rate:

          Julio bought another $10K worth April 25th:
          His ROI April 1, 2022 – September 30, 2022 @ 7.12%
          His ROI October 1, 2022 – March 31, 2023 @ 9.62%
          His ROI April 1, 2023 – September 30,2022 = 0% Fixed Core + Future Inflation Rate

          Reply
    • No. TreasuryDirect only allows individual accounts to purchase for themselves. No joint accounts either. If your significant other wants to purchase up to the $10k per person limit, they would need to open their own account.

      Reply
    • Great question, Alex. While I personally invest in a number of crypto platforms, including Voyager, nothing is as safe as government-backed bonds.

      Stablecoins like USDC and GUSD are pegged to the dollar 1:1, but there’s still an increased risk since crypto platforms reinvest the tokens to earn a higher return (i.e. yield farming, loans, etc.).

      Put it in another way, in order to pay you 9% interest, they need to earn a higher amount in order to remain profitable. This inherently has a higher risk profile.

      Reply
    • TreasuryDirect (where you buy I Bonds from) is only meant for individuals to buy securities from the Treasury and manage them through an account within their website, so you can’t use it to buy Treasuries for an IRA.

      Even if you could, I don’t think you’d want to anyway, since you’re using after-tax money in a pre-tax account.

      Reply
  24. I waited to10/29 to buy I bonds which was too late. Treasury couldn’t complete the transaction until 11/1which is the date of my bond, not 10/1 which I intended.

    Reply
    • Thanks for the feedback that people may have to buy a few days earlier to ensure their purchase month isn’t delayed. That’s a bummer, but not so bad. You’ll still get 6 months worth of interest accrual at 7.12%. Then just hope that the next rate setting is competitive.

      Reply
    • Yes, I’d max out on January 31 (and get a full month’s worth of interest in just one day) to lock in the 7.12% for the following six months!

      Reply
    • That depends on what would you do with the money otherwise and what return vs risk that gives you. We know for sure if you buy the bonds now you’ll get a great rate overall for the next 12 months and then we’ll have to see what the inflation reading is next April.

      Reply
    • Because you’ll get the 7.12% for the following six months AFTER your 3.54% rate is over in the first six months of owning the bond. That’s guaranteed whereas the rate after 7.12% is an unknown. No one can predict what inflation is in 2022.

      Reply

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