Friday, April 15, 2011

I-Bond Rate Prediction for May 1st

I'm predicting a fixed rate of 0.0% and a composite rate of 4.6%.

In September 2010 the CPI-U was 218.439.
In March 2011 the CPI-U was 223.467.

That's a 2.30% increase over the six month period. Inflation has not been very tame.

Fixed rate = 0.00%
Semiannual inflation rate = 2.30%

Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]
Composite rate = [0.0000 + (2 x 0.0230) + (0.0000 x 0.0230)]
Composite rate = [0.0000 + 0.0460 + 0.0000000]
Composite rate = 0.0460
Composite rate = 4.6%

Here is a list of reasons why I think the fixed rate portion will be 0.0%.

1. Duh!

In all seriousness, there is no way that they are going to offer a rate greater than 4.6% on these I-Bonds. No frickin' way.

See Also:
I-Bond Rate Prediction for November 1st

Source Data:
St. Louis Fed: CPI-U
I Savings Bonds Rates & Terms


Stagflationary Mark said...

I want to also point out that the government knew that this day was coming.

December 3, 2007
Extremely Bad News for I-Bonds!

The reduction from the $30,000 annual limit in effect for both series since 2003 was made to refocus the savings bond program on its original purpose of making these non-marketable Treasury securities available to individuals with relatively small sums to invest.

This is entirely consistent with Alan Greenspan's remarks from 1966.

The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

Mr Slippery said...

Thanks for this forecast. 4.6% sounds good until you realize that you are going to lose 4.6% to inflation.

Nowhere to hide.

Stagflationary Mark said...

Mr Slippery,

It isn't all bad.

You can't run, but you can't hide either.

Hey, just trying to put a positive spin on it, lol. Sigh.