Monday, May 2, 2011

I-Bond Rate: 4.6%

May 2, 2011
Series I Savings Bond rate leaps to 4.60 percent, up from 0.74 percent

The Treasury Department announced new rate for one of It's Only Money's favorite savings vehicles - Series I Savings Bonds, and it's a whopper.

This was the rate I expected back in April.

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%.

The only real assumption was assuming that we are still in crisis mode and the fixed rate would therefore be stuck at the 0.0% floor. See this post for charts that show how this crisis assumption comes into play.

The government clearly believes the crisis is still with us. Since the 4.6% rate is all just inflation, these bonds have very little chance of making one more prosperous.

I'll be a buyer this month though, just like I've been a buyer every year since 2000. I consider the 4.6% rate to be a suitable candidate for the least worst prosperity destruction option.


Mr Slippery said...

What a great call on the rate!

You sure know your treasury maths,.

fried said...

I was waiting for you to post on the new ibond rate...I guess I'm a buyer as well, though I passed on the last year. Nice observation on the zero percent fixed portion of the bond.

Stagflationary Mark said...

Mr Slippery,

If we just assume worst case scenario then we will neither be inaccurate nor disappointed! Woohoo! ;)

Stagflationary Mark said...


The predictions are certainly easier at the 0.0% floor. I'm guessing the rate could have easily dropped from 4.6% to 2% without it.

Is it any wonder that the government reduced the amount of I-Bonds we can buy by 83% just a few years ago? I think it was at least partly in anticipation of this day.