Picking up Nickels

Wednesday, October 30, 2013

September 2013 CPI-U numbers finally released: I Bond rates remain flat

The U.S. Bureau of Labor Statistics finally released the September 2013 Consumer Price Index (CPI-U) inflation data delayed by the government shutdown this morning, which increased by 0.12% last month.

The release of the September inflation data is typically of the best times to consider purchasing I Bonds. If the release of the data hadn't been delayed, we would have known what the rate of return for October 2013 I Bonds would have been 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. Unfortunately, the data came out a bit late to be useful for evaluating October I bond purchases.

Using the CPI-U data from March 2013 (232.773) and September 2013 (234.149) (courtesy of inflationdata.com), we can go through the exercise of calculating the variable rate for the second 6 month period for October 2013 issue I Bonds:

That would mean these bonds would earn a rate of 1.18% (using 0% fixed & 1.18% variable) for the first 6 months and coincidentally also earn 1.18% (combined 0% fixed & 1.18% 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 from E-Loan that I put some cash in a few weeks ago.

I already bought the maximum amount from treasurydirect.gov in April, so I can't purchase any more I Bonds until January 2014. I'll continue to monitor the CPI-U and will probably reevaluate them in April 2014.


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