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I bond rate reset May 1
Old 04-20-2011, 09:05 AM   #1
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I bond rate reset May 1

The reset on the I Bond variable rate is looking good at 4.6% come May 1st. My I Bonds have a fixed rate of 1.2% so I am looking at 5.8% for the period of May-Nov 2011. Some you have some older ones with a 3% fixed rate are really going to like this news.

» Series I Savings Bonds Rates – May 2011
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Old 04-20-2011, 09:39 AM   #2
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Wow -- that's 8.0% for mine (purchased in 2000 with 3.4% fixed rate). Cold dead fingers, at least until they mature.

Just wish I had a lot more of them right now. The 3.4% fixed rate helps me keep up with "real" inflation I feel and not just the reported rate...
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Old 04-20-2011, 02:12 PM   #3
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This is all about energy and food prices. Here are some numbers for 6-month price increases.


__2.32% All items (this is the number used for I-bonds)
_16.60% Energy
__2.23% Food
__0.71% All items except food and energy
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Old 04-20-2011, 07:48 PM   #4
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Originally Posted by ziggy29 View Post
Wow -- that's 8.0% for mine (purchased in 2000 with 3.4% fixed rate). Cold dead fingers, at least until they mature.

Just wish I had a lot more of them right now. The 3.4% fixed rate helps me keep up with "real" inflation I feel and not just the reported rate...
Ditto on the cold dead fingers for my 2000 era bonds also. Do I bonds stop earning interest after 30 years?
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Old 04-20-2011, 09:34 PM   #5
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Do I bonds stop earning interest after 30 years?
Yes :-(
"I Bonds grow in value with inflation-indexed earnings for up to 30 years"

Individual - I Savings Bonds Rates & Terms
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Old 04-20-2011, 09:44 PM   #6
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30 years and uncallable. That's still pretty darn good. Like Ziggy, I just wish I'd bought more of 'em when they were at real returns of 3%+.
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Old 04-21-2011, 03:43 AM   #7
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I bought my I bonds in April 2005 with a fixed rate of 1.2%. They offered a unique advantage to me at the time, with the interest being deferred it was not added to my current annual income for the calculation of child support. Additionally my state has a 5% tax on interest and dividend income over $2400 annually if you are single.

Over the last 6 years I have seen 6 month periods between 0% (the fixed rate is not a guaranteed rate)and 6.73% return. Running my beginning balance vs. my current balance on a compound interest calculator I have seen an average of 4.0% return annually since 4/05. Doesn't seem too bad considering I pushed the interest out into a period where I will be working less or not at all and it won't be subject to a 5% state income tax.
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Old 04-21-2011, 12:33 PM   #8
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My 33 $100 I bonds were bought between May 2004 and Jan 2007. I stopped building the ladder because the fixed rates were so low with no sign of improvement.

I used page 7 of this document
http://www.treasurydirect.gov/indiv/tools/sbermay10.pdf
to see the fixed and composite rates.

Is that the correct source to use?
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Old 04-21-2011, 02:18 PM   #9
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Originally Posted by shotgunner View Post

Over the last 6 years I have seen 6 month periods between 0% (the fixed rate is not a guaranteed rate)and 6.73% return.
From the Savings Bond web site:


Fixed Rate:
  • Announced each May and November
  • Applies to all bonds issued during the six months period beginning with the announcement date.
  • Remains the same for the life of the bond
The Secretary of the Treasury, or the Secretary’s designee, determines the fixed rate of return. The fixed rate is established for the life of the bond. The fixed rate will always be greater than or equal to 0.00%. However, the fixed rate is not a guaranteed minimum rate; the composite rate could possibly be less than the fixed rate in deflationary situations. The Secretary’s determination of fixed rates of return, semiannual inflation rates, composite rates, and savings bonds redemption values is final and conclusive.
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Old 04-21-2011, 02:25 PM   #10
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Quote:
Originally Posted by freebird5825 View Post
My 33 $100 I bonds were bought between May 2004 and Jan 2007. I stopped building the ladder because the fixed rates were so low with no sign of improvement.

I used page 7 of this document
http://www.treasurydirect.gov/indiv/tools/sbermay10.pdf
to see the fixed and composite rates.

Is that the correct source to use?
Looks correct to me, I just took my ending balance vs. my starting balance over a 72 month period. You can see in this chart that the fixed rate really affects performance.

The inflation in I bonds such as the 6.73% I enjoyed was for the period following Katrina and $3 a gallon gas. The 0.00% I did not enjoy so much happened following the oil market collapse in early 2009. Now with gas heading for $4 a gallon the interest rate is going to 5.8% for mine. See a correlation here?
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Old 04-21-2011, 02:57 PM   #11
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The inflation in I bonds such as the 6.73% I enjoyed was for the period following Katrina and $3 a gallon gas. The 0.00% I did not enjoy so much happened following the oil market collapse in early 2009. Now with gas heading for $4 a gallon the interest rate is going to 5.8% for mine. See a correlation here?
Clearly: If we really want price stability, we need to get the hell off of our oil addiction. We shouldn't have the economy so dependent on a commodity which spikes in price whenever a bad economy starts improving; that's a good way to make sure it stays bad and send a young, fragile recovery into double-dipsville.
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Old 04-21-2011, 03:06 PM   #12
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Clearly: If we really want price stability, we need to get the hell off of our oil addiction.
I agree with you Ziggy, however until we find or invent something that provides the same amount of thermal energy as a gallon of oil (economically) it will not happen. With fracking we now have a 300 year supply of natural gas but we do not have the national fleet or infrastucture to use it effectively for transportation. Converting to it's use for transportation prohibitively expensive.

My point was oil clearly drives the I in I bonds with how inflation is being calculated/determined.
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