Picking up Nickels

Tuesday, October 16, 2012

September CPI-U numbers released: October 2012 I Bonds worth considering

The U.S. Bureau of Labor Statistics released the September 2012 Consumer Price Index (CPI-U) inflation data this morning, which increased by 0.45% last month.

As always, now 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 October 2012 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 March 2012 (229.392) and September 2012 (231.407) (courtesy of inflationdata.com), we can calculate the variable rate for the second 6 month period for October 2012 issue I Bonds:

That would mean these bonds would earn a rate of 2.20% (using 0% fixed & 2.20% variable) for the first 6 months and 1.76% (combined 0% fixed & 1.76% variable) for the second 6 months. In this low interest rate environment, Series I savings bonds are still a solid choice when compared to short term investments like the 1 year CD @ 1.10% APY currently being offered at Bank of Internet USA.

I already bought the maximum amount from treasurydirect.gov in January, so I can't get my hands on any more until 2013 at the earliest. I'll be monitoring the CPI-U in the meantime and try to decide if I should buy ASAP or wait until May 2013.


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