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Tuesday, November 03, 2009

Inflation Protected Series I Bonds Now Pay 3.36%

The Bureau of the Public Debt today announced an earnings rate of 3.36% for Series I Savings Bonds issued from October 2, 2009 through April 30, 2010.

The 3.36% earnings rate for I bonds bought from November 2, 2009 through April 30, 2010 will apply for their first six months after issue. The earnings rate combines a 0.30% fixed rate of return with the 3.06% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). When the inflation rate is less than zero, a bond's earnings rate is less than its fixed rate (but the earnings rate is never less than zero).

Bob Brinker says on the radio we are seeing deflation but that is due to a bubble in inflation a year ago due to higher oil prices. Those good at math can easily see the bubble in the CPI-U data corresponding to oil prices near $150. If the CPI stays where it was for the last (Sept.'09) reading then we will see significant ANNUAL inflation in November and December. For example:
Dec. 2008 CPI-U = 210.228
Sept. 2009 CPI-U = 215.969
Change = 5.741 / 210.228 x 100%
or 2.73% annual inflation!
CPI-U Table
The fixed rate for Series-I Bonds applies for the 30-year life of I bonds purchased during this six-month period.

Minimum purchase:
  • $50 for a $50 I Bond when purchasing paper bond certificates
  • $25 for a $25 I bond when purchased electronically via TreasuryDirect
Maximum purchase(per calendar year):
  • $5,000 in TreasuryDirect and $5,000 in paper bonds
  • $10,000 total per social security number
Denominations:
  • Paper bonds: $50, $75, $100, $200, $500, $1,000, and $5,000
  • Electronic bonds via TreasuryDirect: purchase to the penny for $25 or more
For more information, see:

For older ibonds and what they will pay, see:


Disclaimer: I own Series I Bonds in my personal account. Due to the small amount of i-bonds you can buy now, I own far more TIPS and TIPS funds in my personal and newsletter (FREE SAMPLE) portfolios.

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