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.

March 2011 CPI-U Released

The CPI-U value for March increased again to 223.467, up from February’s value of 221.309. March is also the final month in the semi-annual inflation period used for the May I Bond rate. The resulting change between September’s value of 218.439 and March’s 223.467 results in a 2.3% CPI-U increase.

The inflation linked rate of the May I Bond will be 2.3%. The fixed portion will not be known until the new composite rate is announced Monday, May 2nd.

 

Sept. Oct. Nov. Dec. Jan. Feb. Mar.
218.439 218.711 218.803 219.179 220.223 221.309 223.467

March 2011 CPI-U details