**Update:** The Treasury Department announced the fixed rate component on new Series I bonds would be 0.30% for the bonds issued in the next six months. Coupled with the inflation component we all know ahead of time (see below), the new Series I bond rate will be 3.36% for the next six months.

For the last six months, my Series I Savings Bonds have been earning exactly 0.00% APY interest. If you remember from the Savings Bond Foundation post ^{[3]}, Series I savings bonds earn interest based on an equation that has both an inflation rate component and a fixed rate component.

The inflation rate component is set twice a year, November and May, and calculated based on six months of inflation data. The November rate is set based on inflation between March and September, the May rate is set based on inflation between September and March (see how that works out?).

## Inflation Component: 1.5325%

Given CPI-U numbers, the semiannual inflation component of all Series I bonds for period between November 2009 and April 2009 will be **1.5325%**. This is a great increase over the current semiannual inflation component, -2.78%.

You calculate it by taking the CPI-U value for September and comparing it with the one for March. You can find both reports on this page of inflation data ^{[4]}. March 2009 CPI-U was 212.709, September 2009 CPI-U was 215.969, which is a difference of 3.26. Divide that by 212.709 and you get 1.5325%.

Avoid the temptation to multiple it by 2 to get an annual inflation rate because the Series I bond equation uses a semiannual inflation figure to calculate the bond’s rates.

## Buy Series I Bonds?

The big question is whether they make a good investment and only you can decide that based on your risk tolerance. If you buy it in November, the yield will be 3.065%. You must hold a Series I bond for 12 months and you will lose 3 months of accrued interest if you redeem it before five years, you’re looking at the equivalent of 15-month CD at 3.065%. The yield is slightly higher if your state has income tax because it’s exempt from state income tax (and federal income tax for qualified educational expenses).

**Should you buy Series I Bonds today or in November?** That’s a tricky question. We know the inflation component but we don’t know what they will set the fixed rate component to. Right now, the fixed rate is 0.10% and it’s possible for the Treasury to lower the fixed rate to 0.00% (or raise it… but I would doubt that).

**Why you might want to:** You can buy Series I bonds on the very last day of October and get credit for the entire month of October. You would earn no interest because of the extremely low semiinflation figure but you would lock in a 0.10% fixed rate and you could redeem your bond one month earlier.

**Why you might not want to:** The composite rate changes every six months based on your issue date. So if you buy the bond this month, you’ll have 6 months of 0% because that’s the rate as of October. When it comes time to reset, then you’ll get a composite rate based on the 0.10% fixed rate and the 1.5325% semiannual inflation rate. It, in a sense, puts you back in time by six months.

Personally, if I wanted to buy more Series I bonds, I would do it in November (November 30th to be exact).

## What will MY bond get?

If you’re curious what interest rate your bond will be getting for six months, on an APY basis, you can use my Series I Bond rate calculator ^{[5]} to find out. For example, we have I bonds with a fixed rate of 1.00%. With the 1.5325% inflation component, we can expect to see a 4.08% interest rate on our bond. Beats even the generous of CD rates ^{[6]} by a significant margin.

This ends your semi-annual update on Series I bond rates. ðŸ™‚

*(photo by allyrose18 ^{[7]})*