Tuesday, October 16, 2012

What will the next I Bond rate be? November 2012

The CPI-U value increased from March's value of 229.392 to September's value of 231.407, resulting in a semi-annual adjustment of 0.88%. Since we now know the inflation-linked rate of the I Bond rate for November, we can calculate the possible new rates. The fixed rate portion of the new rate will not be known until November 1.

CPI-I values for March - September
March April May June July Aug. Sept.
229.392 230.085 229.815 229.478 229.104 230.379 231.407

Possible November I Bond rates
Theoretical Fixed Rate Composite Rate
0.00% 1.76%
0.10% 1.86%
0.20% 1.96%
0.30% 2.06%
0.40% 2.16%
0.50% 2.26%
0.60% 2.37%
0.70% 2.47%
0.80% 2.57%
0.90% 2.67%
1.00% 2.77%
1.10% 2.87%
1.20% 2.97%
1.30% 3.07%
1.40% 3.17%

Since the fixed rate has remained at 0% for 2 years now, I strongly suspect it will remain there, resulting in a 1.76% composite rate for new I bonds sold in November. Since the fixed rate can't decrease, there is no benefit to buying I Bonds now or after the November 1 rate change.