April 2007 Series I Savings Bond update

The U.S. Bureau of Labor Statistics released the March 2007 Consumer Price Index (CPI-U) inflation data this morning, which increased by 0.91% since last month.

As I have mentioned before, now (along with the release of the September CPI-U) is one of the best times to consider purchasing I Bonds. The reason for this is that we now know what the rate of return for April 2007 I Bonds will be for both the first and second six month periods, which is important since I Bonds must be held for 12 months before they can be redeemed.

Using the CPI-U data from September 2006 (202.9) and March 2007 (205.352) (courtesy of inflationdata.com), we can calculate the variable rate for the second 6 month period for April 2007 issue I Bonds:


That would mean these bonds would earn a rate of 4.52% (using 1.40% fixed & 3.10 variable) for the first 6 months and 3.85% (using 1.40% fixed & 2.42% variable) for the second 6 months. Once again, I Bonds are not an attractive investment at this rate considering that several online savings accounts are currently earning 5%.

I will reassess I Bonds in October 2007 once the September 2007 CPI-U numbers are out. With the rising fuel and food prices we've been seeing lately, the I Bond inflation component could get a large bump later this year.