Saturday, April 16, 2011

What will the next I Bond rate be? May 2011

May I Bond Rate

The semiannual inflation change period for the May I bond is now complete, meaning we can calculate when the May 2011 rate will be based on different fixed rates.

The CPI-U change increased by 2.3% from September 2010’s value of 218.439 and March 2011’s value of 223.467. Based on this, the composite rate would be between 4.60% and 6.03%, depending on the announced fixed rate.

Theoretical Fixed Rate Composite Rate
0.00% 4.60%
0.10% 4.70%
0.20% 4.80%
0.30% 4.91%
0.40% 5.01%
0.50% 5.11%
0.60% 5.21%
0.70% 5.32%
0.80% 5.42%
0.90% 5.52%
1.00% 5.62%
1.10% 5.62%
1.20% 5.83%
1.30% 5.93%
1.40% 6.03%

Buying an I bond before May 1st will result in a 0.74% composite rate for 6 months, and then a 4.60% for the next 6 month period beginning in October.

Since the CPI-U change alone results in a very attractive rate in today’s environment, I doubt the fixed rate will be higher in May than it is today.

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