Tuesday, October 16, 2012

I-Bond Prediction for November 1, 2012

I'm predicting a fixed rate of 0.0% and a composite rate of 1.76%.

In March 2012 the CPI-U was 229.392.
In September 2012 the CPI-U was 231.407.

That's a 0.878% increase over the six month period. Inflation has been fairly tame.

Fixed rate = 0.00%
Semiannual inflation rate = 0.878%

Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)]
Composite rate = [0.0000 + (2 x 0.00878) + (0.0000 x 0.00878)]
Composite rate = [0.0000 + 0.01756 + 0.0000000]
Composite rate = 1.76%

As seen in the following chart, predicting the 0.0% fixed rate just keeps getting easier and easier.

Click to enlarge.

The government would definitely set the rate below zero if it thought it could do so (without waking more than a few out of their blissful illusion of prosperity slumber). It's not that easy though. "The fixed rate will always be greater than or equal to 0.00%." That's what the government has said. Since lowering the rate isn't too likely, the powers that be simply reduced how many I-Bonds we can buy. You know, to refocus the program on small investors.

December 7, 2007
Annual Purchase Limit For Savings Bonds Set at $5,000

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.

Funny how that was the very month the great recession began. One might even say hilarious, lol. Sigh.

Gallows humor!

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


Stagflationary Mark said...

It's nice to know that there must have been at least one government worker who shared my belief that real yields would continue to fall as the illusion of prosperity bubble continued to pop. I am not alone!

Gallows sarcasm. Sigh.

TJandTheBear said...


Stagflationary Mark said...


Fascinating website! I was a particular fan of the following post.

Long term bear market will turn around for USD

There are many individuals and institutions trying to imply that the US Dollar will simply keep falling until it is worth nothing. However, a good contrarian investor knows that all bear markets come to an end eventually!

Hahaha! The sarcasm is laid on pretty thick. Even as a gold heretic (who no longer wishes to own it), I can certainly appreciate that, lol.

Anonymous said...

How about the E-Bond rate adjustment on Nov 1st?

Stagflationary Mark said...


Sure thing! I'll have a prediction up soon. :)