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Series I Savings Bond Rate Update (November 2011)
Posted By Jim On 10/24/2011 @ 7:11 am In Personal Finance | 25 Comments
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.
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  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.
Remember there are two quirks with Series I Bonds:
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 . 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  to find your new rate.
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 CPI-U: http://www.bls.gov/news.release/cpi.t01.htm
 high yield savings account: http://www.bargaineering.com/articles/high-yield-savings-accounts-rates.html
 Series I Bond rate calculator: http://www.bargaineering.com/articles/series-i-bond-rate-calculator.html
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