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Series I Savings Bond Rate Update (May 2012)
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If it’s May or November, it’s time for an update to the rates on a Series I Savings Bond!
As of May 1st, 2012, the Treasury Department announced that the fixed rate on newly issued Series I bonds would remain at 0.00%. Series I bonds have had a 0% fixed rate dating back to November 2010 (they were hardly much higher before then, the last time it was above 1% was back in November 2007 to April 2008 when they were 1.2%). This is not surprising given monetary policy.
The inflation rate predictably, since we can calculate it based on the CPI-U, slipped as well to 1.10% from 1.53%, the preceding six months.
Using our handy Series I rate calculator, we know that bonds you purchase today will have a yield of 2.20% for the next six months (when the inflation rate will change).
I’ve long thought of Series I bonds as being a good investment, useful for that ultra safe part of your portfolio where you just want to get a little more than your average online savings account.
In recent years, it’s been a lot more!
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I have trouble understanding if the fixed rate is 0%
how would I earn 2.2% for the next 6 months
how does that work
please explain
The Fixed Rate is only one of two pieces that is used to determine the Composite rate which drives the return on your bond. The second rate is an Inflation Rate.
Here is the formula for how they are combined:
Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]
Using the current rates in use as of May 1st:
Composite rate = [0.0000 + (2 x 0.0110) + (0.0000 x 0.0110)]
Composite rate = [0.0000 + 0.0220 + 0.0000000]
Composite rate = 0.0220
Composite rate = 0.0220
Composite rate = 2.20%
You can see all this, and more, on the Treasury Direct website concerning Series I Bonds Rates and Terms, here:
http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm
Also, under “Relate Posts,” there is an older article, Series I Bond Rate Calculator, that goes over the calc.
Resources abound.
If your getting 2% in this economy grab it. A safe investment like this you will never find.
How/where can I buy it? Is there any minimum amount to buy? Do we have to pay commission to buy it? Thanks.
You can buy it at TreasuryDirect.gov, no commission.
If you wonder what’s the value of your Savings Bonds, access Savings Bond Wizard via http://www.treasurydirect.gov. Once downloaded & you input your bond, one can easily view the denomination (EE or I), issue date, price, interest earned, current value, rate and yield,
next interest date & final maturity date.
For bonds purchased via Treasury Direct (no paper bond with a serial #), simply enter serial number as “Treasury Direct”.
To better understand rate differences between EE & I bonds, enter a TEST sample of each with same values & dates. Viola! You can visually see the benefits of I bonds vs EE bonds.
NOTE: Label/Save this file to your PC as “TEST” to ensure your “actual” bond holdings do not become intermingled with the TEST file. Next month or year, access files to view the current value increases.
This WIZARD helps identify which bonds you may wish to cash or retain by saving your file based on each child’s name. Always available when stored and updated as purchases/sales occur.