- Bargaineering - http://www.bargaineering.com/articles -

Series I Savings Bond Rate Update (November 2011)

Now is a great time to buy yourself a Series I Bond and I will probably be loading up on some Series I bonds before the month ends. Why you ask? With my crystal ball, I know that the interest you can earn on Series I savings bonds is going to be pretty good. And pretty good for the next year. 🙂

Calculating New Rate

Every six months, the Series I bond’s rate gets adjusted for inflation. It happens on November 1st and May 1st. Since the CPI-U [3] is used and published every single month, we are basically given all the tools we need to calculate this. September 2011 CPI-U was 226.889 and March 2011 CPI-U was 223.467, which gives us a semi-annual (6 month) increase of 1.53%.

Plug that into the series I bond rate equation, assuming a fixed rate of 0%, and you’re left with a bond that will yield a whopping 4.60%. If the fixed rate is higher, which is a huge if and one I’m pretty sure will not happen, the rate will be higher.

Two Series I Bond Quirks

Remember there are two quirks with Series I Bonds:

Why Is It A Good Time?

What does this mean? If you buy a bond today, you will get 4.60% for six months and then 3.06% for another six months. That crushes anything you can get at a high yield savings account [4]. The only thing to remember is that you can’t closed or redeem them within a year and if you redeem it before five years, you surrender the last three month’s of interest. Even with those stipulations, it’s a pretty solid deal.

If you have an old bond with a different fixed rate, you can use my handy Series I Bond rate calculator [5] to find your new rate.