September 2018 CPI-U numbers released: Neutral on November 2018 I Bonds

The U.S. Bureau of Labor Statistics released the September 2018 Consumer Price Index (CPI-U) inflation data last week, which increased by 0.12% over the past 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 2018 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 2018 (249.554) and September 2018 (252.439) (courtesy of inflationdata.com), we can calculate the variable rate for the second 6 month period for October 2018 issue I Bonds.

That means these bonds would earn the current rate of 2.52% (using 0.3% fixed & 1.11% variable) for the first 6 months and 2.62% (combined 0.3% fixed & 1.16% variable) for the second 6 months. IMO, the current 2.52% rate doesn't really make an October purchase terribly appealing unless you believe that the 0.3% fixed portion will go down next month. At this point, I believe an I Bond purchase is a basically a wash when compared to something like the 1 year CD @ 2.65% APY currently being offered at Live Oak Bank.

Having already maxed out my 2018 purchase limit in January (as I did in 2017), I can't act on these anyway. As always, I will continue to evaluate them and see what makes sense for me in 2019.