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# Series I Bonds Interest Rate Update (Nov 2012)

Guess who just released inflation data for September? The Bureau of Labor Statistics [3]!

Guess who can now calculate how much a Series I bond will be yielding once the inflation/variable portion of the interest rate is reset in November? We can!

Just to recap, the interest rate you get on a Series I bond is a calculation that takes into account the variable rate, which resets every March and November, and the fixed rate, which is set during March and November but remain fixed for the life of the bond. The calculation is pretty simple but we built this Series I bond interest rate calculator [4] just to make it easier.

## New Inflation Rate

The BLS reported that the September 2012 CPI-U was 231.407 and knowing that the March 2012 CPI-U was 229.392. Divide the September figure by the March figure and you’ll get 1.00878 – or a semi-annual increase of 0.878%.

What we won’t know is the fixed rate on bonds come November, though my guess is that they’ll remain at 0%, which is what they are right now (and have been since Nov 2010 [5]).

## Buy in October? Or Wait?

If you’re thinking about buying bonds, you can buy one today and get 2.20% APY for six months (based on the last period’s inflation rate and 0% fixed rate) and then it switches over to 1.76% (the upcoming inflation rate and 0% fixed rate). When you buy a bond, you get that period’s rates for six months, so you’re always lagging. It’s not a bad time to buy it since you’ll be getting 2.20% APY, which is better than the online savings accounts [6].

If you’re thinking about it, I think it’s better to do it today than November 1st. The only risk is that the fixed rate goes up, which seems unlikely, and by purchasing it before the end of the month, you get credit for the entire month.

One word of warning, don’t put emergency funds in a Series I bond, you cannot redeem them within a year. Also, if you do redeem it within five years, you will have to forfeit the last three months of interest.