November 2011 - May 2012 I Bond Rate

The rate for a newly purchased I Bond for November 2011 through April 2012 is 3.06%.

This rate includes the CPI-U change from March through September, which increased 1.53%. The newly announced fixed rate is 0.00%. This is the same fixed rate as the previous 6 months. The resulting composite rate for a newly purchased rate is 3.06%.

http://treasurydirect.gov/news/pressroom/pressroom_comeeandi1111.htm

November 2011 I Bond rate

Now that the CPI-U values for March through September have been released, we can determine what the range of possible rates will be for the November I Bond.

The CPI-U increase from 223.467 to 226.889 results in an inflation-linked rate of 1.53%. Buying an I Bond in October (before the rate change) would result in 6 months of the current 4.60% composite rate followed by 6 months of the new composite rate of 3.06%.

The new November composite rate cannot be determined exactly since the fixed rate is not known until November. We can determine the possible range of composite rates based on the inflation-linked rate of 1.53% and calculating for different values of the new fixed rate. If you are debating whether or not to buy now or in November, the current fixed rate of 0% does not lend itself to long-term investing while the 4.60% composite rate is more attractive for shorter-term investing. That said, it doesn’t seem likely the fixed rate will rise above 0% in November, either.

Theoretical Fixed Rate	Composite Rate
0.00%	3.06%
0.10%	3.16%
0.20%	3.26%
0.30%	3.36%
0.40%	3.47%
0.50%	3.57%
0.60%	3.67%
0.70%	3.77%
0.80%	3.87%
0.90%	3.97%
1.00%	4.08%
1.10%	4.18%
1.20%	4.28%
1.30%	4.38%
1.40%	4.48%

Since the current 0% fixed rate still results in a competitive 3.06% composite rate for a new I Bond, I believe the fixed rate will remain at 0% in November. The official release of the new rate will be on Tuesday, November 1, 2011.

September CPI-U Value

The CPI-U value for September rose to 226.889. The September value also completes the semiannual period used in the November rate change. Based on the March to September change in CPI-U, the inflation-linked rate for the next semiannual rate change will be 1.53%.

March	April	May	June	July	Aug.	Sept.
223.467	224.906	225.964	225.722	225.922	226.545	226.889

August CPI-U Increase

The CPI-U value for August increased to 226.545. The August value represents a 1.38% increase since March’s value of 223.467. With one month remaining before the November I Bond inflation-linked rate is known, it seems inflation is under control. With no increase in September and a fixed rate on 0%, an I Bond would offer a 2.76% composite rate. The full range of possible rates will be known in mid-October.

 

March	April	May	June	July	Aug.	Sept.
223.467	224.906	225.964	225.722	225.922	226.545

June & July CPI-U Increases

The CPI-U recovered some ground lost in June by climbing to 225.922 in July. The July value is still lower than the May value, but is higher than the March value, which is what the next I Bond rate will be based on. The March to July change in CPI-U is 1.1%. Given no increase in August and September and a continued 0% fixed rate, a new I Bond composite rate would translate to 2.2%. The rate will not be known until all the semi-annual CPI-U values are known and the new fixed rate is announced November 1.

 

March	April	May	June	July	Aug.	Sept.
223.467	224.906	225.964	225.722	225.922

End of Paper Bonds from Institutions

The US Treasury announced today that paper savings bonds will no longer be sold at financial institutions beginning January 1, 2012. Although paper bonds will no longer be available through institutions, they will still be available when purchased using your tax refund or as a replacement for reissued, lost, stolen, or destroyed paper bonds.

The move to cut paper bonds is said to save over $70 million in the first five years. All bond purchases from consumers will now be through TreasuryDirect.

There is no indication how this change will impact the current purchasing limit of $5,000 electronic and $5,000 paper bonds per year.

Treasury to End Over-the-Counter Sales of Paper U.S. Savings Bonds; Action will save $70 million over first five years

Banks will no longer sell Savings Bonds

May CPI-U

The May CPI-U value rose to 225.964. The November I Bond rate will be based on the change from the March to September rate.

March	April	May	June	July	Aug.	Sept.
223.467	224.906	225.964

CPI-U.info: CPI-U value for May 2011