# Series I Savings Bond Rates – November 2011

This is just a quick note to say that September inflation numbers are out, so we can now calculate the new Series I Savings Bond rates that will go into effect in November. I’ve talked in the past about how to predict Savings Bond interest rates. The short answer is this:

The I Bond rate is made up of two pieces: the fixed rate and the variable rate. The variable rate is pegged to inflation, and thatâ€™s the piece that you can easily calculate if you know how much the CPI-U has changed over the past six months. Simply divide the old CPI-U into the new one and you’ll get an estimate of the semi-annual inflation rate. From there, you just double it to estimate the annual change and add the fixed rate.

Back in April, the CPI-U stood at 223.467 and by September, it had increased to 226.889. This work out to a 1.53% increase (i..e, 226.889 / 223.467 = 1.0153). If we double this, we get 3.06% for the variable portion of the I Bond rate.

In other words, all I Bonds will receive a rate of 3.06% + the applicable fixed rate for the next six month period. For new issues, I would fully expect the fixed rate to stay at 0%, but we’ll have to wait until November 1st to find out for sure.

If you buy now, you’ll get the current rate (4.6% + 0%) for the next months, after which you will receive 3.06% for six months, and then whatever the applicable rates are after that. If you wait until November 1st, you’ll like receive 3.06% + 0%, and then whatever the rate is six months in the future.

In other words, if it were me, I’d probably buy now instead of waiting. In fact, we did just that last May, when we bought our annual limit at the 4.6% rate. What about you? Do you invest in I Bonds? If so, have you already taken the plunge for this year? Or have you been waiting in hopes of a better (non-zero) fixed rate?

### 11 Responses to “Series I Savings Bond Rates – November 2011”

1. I bought the limit of I-bonds in 2001. The fixed rate on them is 3.00%. This past year (Nov to Nov) the total rate of return on them has been .0487 (the total interest divided by the average balance for the year). It seems that it should have been more. Am I calculating this wrong? Thanks for any insight you can give me!

2. I’m getting over 5% investing in tax free muni bonds at my state (MA). A better option than these I series bonds.

3. @Nickel – I didn’t say it’s not worth investing in I-Bonds, just that I think it’s worth waiting a few more days on the off chance the fixed rate will be greater than zero. You yourself said in a previous I-Bond Rates post that when the fixed rate is zero, you lose money to inflation after taxes (with exceptions like using the proceeds for education expenses). There is some chance that the tick down of the variable rate will cause a corresponding uptick in the fixed rate – though honestly I’m not too hopeful.

4. AaronB: The Treasury has announced that paper bonds won’t be available beyond the end of this year. Not sure what’s up with your credit union. It’s possible that the teller you spoke to was mis-informed, or maybe they really have stopped early.

5. I tried to buy paper bonds at my credit union today (since I’ve misplaced my Treasury Direct crypto card, or whatever it is) and was told that they no longer sell them. In fact, I believe they tried to tell me that they’re no longer allowed to sell them, which is not what the Treasury’s website says (it says they won’t be selling paper bonds after 2011). Confusing and frustrating.

6. I used to invest in IBonds. I do not now… It just does not seem to be worth it. What is the advantage of IBond?

7. This makes me feel better about my Kasasa checking! It is right under 4%.

8. mfeeney and Steve: It all depends on what you’d be doing with the money in the mean time. Even at 3.06%, we’re talking well above current CD rates. And if you break it in a year, you lose 3 months interest.

While it’s impossible to predict what will happen in six months, let’s say things stay the same and you don’t buy until November. In that case, you’ll earn 3.06% for the full year. You can roughly estimate the impact of breaking after the first year is up by multiplying that rate by 3/4.

The answer? 2.295% for a year. Now go compare that to 12 month CD rates…

The bottom line is that the “lost interest” is only lost if you don’t still come out ahead vs. the alternatives.

9. I am waiting, hoping for a better fixed rate. The variable rate is only for six months. Buying now is only borrowing from yourself six months from now, when you’ll be stuck with the 3.06% variable rate for the following six months, even if the new variable rate goes up. It doesn’t seem worth the effort to play games with it. The fixed rate is in effect for the life of the bond.

10. Keep waiting if you want to buy an I-Bond with a fixed rate… I stopped investing in I-Bonds when the fixed portion went away. The fixed and variable portion was the real bonus, now that the fixed portion is gone I just can’t justify the 5 year holding period to avoid lost interest.