Just like last last April, using the newly released March CPU-I data and the information in my How To Predict I-Bond Savings Bond Rates post, we can now try to predict the upcoming I-Bond rate announcement on May 1st.
205.352/202.9 = 1.012085, or a semi-annual increase of 1.2085%.
Total rate = Unknown fixed rate + 2 x Semiannual inflation rate + (Semiannual inflation rate X Fixed rate)
If we assume a fixed rate of the current 1.4%, we get
Total rate = 0.014 + (2 x .012085) + (.014 x .012085)
Total rate = 1.4% + 2.43%
Total rate = 3.83%
For those with existing I-Bonds, the variable rate is about 2.43% on top of your fixed rate. Note that the rate on your bonds changes every six months from the date you bought it, so it might not change immediately in May.
Overall, if you buy in April and lock in your 1.4% fixed rate, you’ll get 4.52% for 6 months and then 3.83% for another 6 months. If you wait until May, even if the fixed rate portion rises to 1.6%, the total rate will barely break 4%. Either way, as a short-term safe investment it’s not a very competitive rate. Unless there is a big jump in the fixed rate to make this an interesting long-term investment, I’ll see you in six months…
By Jonathan Ping | Savings Bonds | 4/22/07, 4:22pm