Series I Savings Bond Rate Update (May 2011)

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Series EE Savings BondsIt looks like the Series I Savings Bond may be competitive again. After a few pathetically low rate adjustment cycles, we can blame low inflation and the economic recession for that, it seems as though the variable rate for Series I Savings Bonds will once again make them competitive with savings account rates again.

To recap, Series I Savings Bond rates are a combination of a fixed rate, which is for the life of the bond, and a variable rate, which is adjusted for inflation as measured by the CPI-U. The equation itself is a little more complicated but you can use this Series I bond rate calculator to help you do the math (the equation isn’t very hard, it’s just hard to explain).

How are we able to predict the rate in May? Easy, the CPI-U we will use is for March and is announced in April (this time it was April 15th). We simply calculate the change from September 2010 (announced in October 2010) and March 2011 and know what the variable interest rate is.

New Variable Rate

The September 2010 CPI-U was 218.439 and the March 2011 CPI-U was 223.467, according to the BLS. Some math tells us the increase was 2.302% over the six months, which comes out to 4.604% for the year. If you own a Series I Savings bond, you know your fixed rate and you can calculate your effective rate for the coming period (adjusting for when you purchased the bond). It’s harder to predict what the fixed rate on new bonds will be but we do know that the current fixed rate on Series I bonds is 0%.

Now that it’s May, we know the fixed rate on new bonds will remain 0.00%, so the effective rate will be 4.6%.

When To Buy?

There’s one trick to Series I Savings Bonds that you should know – if you buy it at the end of the month, you get credit for the full month. If you were to buy the bond on April 30th, it’s as if you purchased it on April 1st. This means that you can keep the savings in a bank, accruing interest, and then pull the trigger at the end of the month and still get credit for owning the bond for the entire month.

Should you buy the bond in April? If you buy the bond in April, you’ll get a 0% fixed interest rate for the life of the bond and the 0.74% variable interest rate. The real interest rate works out to be 0.74% since the fixed rate is 0%. You’ll have that for six months before you get the next interest rate of 4.60%, that’s based on how Series I bonds work. If you wait until May 1, or even better May 31st, you’ll get an unknown fixed rate plus the 4.60%, which is probably a better bet.

If I was looking to buy a bond and was faced with that decision, I’d buy on May 31st. Also remember that your annual limit, per person, is $5,000 in paper bonds (which you buy at the bank) and $5,000 in electronic bonds (which you can buy at If you buy paper, I recommend converting your Series I bonds to electronic.

I still have the bonds I purchased back in April of 2008, when the fixed rate was a whopping 1.30%!

(Photo: karen_d)

{ 19 comments, please add your thoughts now! }

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19 Responses to “Series I Savings Bond Rate Update (May 2011)”

  1. JJ says:

    Planning to do this at the end of May myself (for the first time). It sounds like you have followed these for several years. Two questions…

    1) How often is the rate as competitive as it will be at the end of May (is this an anomaly)?

    2) Is there any way to buy ibonds for both myself an spouse through one TD account. I dread setting up another one and remembering where the card is and the sign in stuff for two accounts. They have the most elaborate sign-in I’ve ever seen.

    • Jim says:

      1. It hasn’t been this high in a few years because the economy has been in such a tough spot. The fixed rate has been fairly low (under 1%) since 2008 and inflation has been low because the economy has been bad. So in the last few years, they’ve lagged (or about the same) as savings and CDs.
      2. Not that I know of. 🙁 We have two accounts and it is one of the most elaborate I’ve seen but it’s more secure.

      • skylog says:

        thanks jim, i was hoping this post was coming soon. it has been some time, but i think i will actually make a purchase come may.

        you both are not kidding on the website. i know it has been talked about to no end, but, man, it is enough to drive one to not even use the site. i do very much value the security aspect, but there has to be (at least a little) easier way.

        • k leber says:

          I have three separate accounts, two personal and one trust, and I solved the elaborate security problem by copying the three cards onto a single paper so they are always available. The $5,000. per year limit on each allows me a purchase of $15K through Treasury Direct and an additional purchase of $15K in paper for a total of $30K. The paper can be converted to electronic, putting everything on-line.

  2. David M says:

    Good Advice on buying toward that end of the month.

    I have over $200,000 in I Bonds bought in 2000 to 2002 – thus my fixed rate portion is 2% to 3.6%.

    I purchased all of these with a credit card at the end of the month. Thus I got 2 months of interest for free before I had to pay.

    I also got lots of United FFM and for most of my purchases they had a bonus and I got 2 miles per $.

    Unfortunately, they no longer let you purchse US Savings bonds using a credit card!!!!

    • skylog says:

      wow, i am little shocked they ever let one purchase with a card. that could have been a great play with some rewards cards…

    • zapeta says:

      I can’t believe they let you do that in the first place, too bad they don’t anymore. Could earn some major credit card rewards!

      I had some I bonds paying a fixed 3.6%, and in my stupidity I sold them after a year….

      • David M says:

        I got 2 First Class Tickets to Japan on United and most of the miles were from purchasing US Savings Bonds!!!!

    • JXZ says:

      David, how did you get around the $5000/year limit? Even if both you and your spouse purchased the maximum, in three years you’ll only have $30,000 in bonds.

  3. Oaks says:

    If one set up their treasury direct account as an individual, you can add your spouse as a “gift” account, under your original account. You will then each have the $5000/year limit, and without the need for a new td account. Children, grandchildren, etc can also be easily added to the gift sub accounts.

    • Oaks says:

      Just one caveat to my own comment- in order for the “gift” account holders to cash in savings bonds, they will need to establish a treasury direct account for themselves, and you then officially transfer the bonds to their account when you wish.

      • david M says:

        In the good old day – I purchased all my bonds in the 2000 to 2004 time period – the maximum was $30,000 a year per individual and $60,000 a year for couples. I purchased $60,000 a year for a few years. Well one year by mistake I purchased $60,500 but no one ever notified me of my mistake.

    • kay says:

      Be aware that gifting is governed by very specific IRS rules. You cannot “change your mind” and remove a gift from the Treasury “gift box” and yet, until a gift is actually transferred to the recipient’s account or in the case of a minor to perhaps a parent’s account, it is not a completed gift. These incomplete gifts do not remove the purchase price from your estate and any interest that accrues is added to the basis of the gift amount until you complete the transfer – it is a gift in the year of the transfer. This can potentially affect the yearly gifting amounts allowed by the IRS. Also, a minor’s sub account can be managed by a parent ONLY until the child reaches 18. You can keep a minor’s bond in a parent’s account after 18 but the parent can do nothing with it – i.e. can’t sell it.

  4. Bill says:

    Well this is reassuring, once again, to see I-bond variable interest tare go up again. Have lots of paper bonds from the early part of the lad decade with 2% and 3% fixed. So this is a sweet deal.even though I ladder my T-bills and they get a measly rate I really sleep well at night. I recommend you all to use treasuries as insurance against losses on your stocks. I have a load of physical precious metals, but bought sparingly in 2009 and stopped buying any that year. Even sold off a bit.

  5. k leber says:

    The I Bonds offer a good alternative to the sick Bank CD rates. I wonder however, when the dept of treasury will get up to the 21st century and eliminate the issuance of paper bonds? They have been talking about it for nearly a decade. It borders on idiocy to continue maintaining two separate, and incompatible, data bases for the same basic product. The savings bond department has a complete record of savings bond activity for the last 75 years. they could easily make the transition from paper to electronic without the necessity for owners to get involved in the conversion. Continuing to maintain two separate agencies in this process should cease post-haste.

  6. Bill says:

    Yah, I used to be able to buy the Series I bonds with a credit card. I used the trick to have the entire purchase amount in a bank for the savings bonds, then use a credit card to buy them, then wait until just the day before I had to pay off the card to avoid interest. Would do the same with rent. And I also got airline miles from the credit card.

    Kudos to David M with foresight to buy $200k worth between 2000 and 2002. I bought $11k worth in 2001 and have been buying I bonds regularly ever since. Had I known there was going to be a $10,000 limit, I would have certainly loaded up back in 2006.

    Also I am buying in earnest now because of the competitive rate versus the 12 month CD rates. I never redeemed an I bond before but if the CPI-U produces another good yield for the variable rate versus CD’s it will be a good idea to hold for another six months beyond the twelve months! I used to buy $1000 per month I bonds. Since I reach the $10,000 limit, I switch to buying TIPS.

  7. yzeevy says:


    Can someone make sense from what I have

    Series I Savings Bond

    IAAAM 12-01-2008 5.32% $5,000.00 $5,316.00

    IAAAB 10-01-2008 0.74% $5,000.00 $5,362.00

    Totals: $10,000.00 $10,678.00

    How come the lower rate makes more than the higher one?
    Are the Interest Rates always the same or they are changing?
    Should I sale the 0.74% and buy new ones? Can I do that??

  8. Andy says:

    If the US credit rating is downgraded (like Greece), how will it affect the I bond or any saving bond? Do you think we will get our money back? or just an IOU from the government?

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