I Bond at 7%???

[jeffrey]

Originally Posted by baselle

That's a little strong. Like any other investment, these things are hard to time and should be a piece of your total portfolio, and really aren't for those who are chasing interest. Its a little like saying that if your favorite mutual fund is doing badly, its not a sound investment.

Don't get me wrong...I'm just saying that if you're going to buy, you should wait until the end of April and see what the CPI comes out to. After seeing that, you'll have a much better idea of whether it's better to lock in the six months at 6.73% or wait until the new base rate is announced in May. With CPI as low as it is now, waiting just makes more sense when you can get a guaranteed 4.25% from a online bank.

[genchan]

OK, I'm ready to take the plunge and add some of these to my investments. I think I will wait until I see the next CPI before deciding. I'm correct in that if I decide to buy in April, I still will get 6 months at 6.7%, right?

I bought the I Bond in January 2006 expecting 7% + interest. When I use the interest calculator on the treasurydirect website, it shows a 2% interest rate. I'm not sure what the true interest rate is currently.

[greedy4chips]

Here is what I found...

If you're interested in finding out what interest rate your Series I bonds are earning right now, use this Savings Bond Calculator . It will give you both the current rate and current value of your Savings Bonds.

However, if the rate isn't what you expected, read on - most investors in Series I Savings Bonds have only a murky idea about how I bond rates work. Every Series I bond's rate not only changes every six months, but can swing widely between an eye-poppingly high rate and zero. Here's why:

Series I interest rates are made up of two components that are added together, a fixed rate component and an inflation rate component.
Fixed rate component

All I bonds issued within the same standard six-month window (either November-April or May-October) have the same fixed rate component. Once a bond is issued, the fixed rate will never change for that I bond. The fixed rate is good until the bond stops paying interest 30 years later.

However, while the fixed rate on a bond that has been issued never changes, the Treasury does announce a new fixed rate for new I bonds each May and November.

The fixed rate component that the Treasury has assigned to Series I bonds at issue has ranged from a low of 1.00% to a high of 3.60%.

Thanks for the reply. The problem I have with the I Bond is that I was comparing CD rates and the I Bond. I chose the bond because it appeared the rate of interest was about 2% higher than any CD. I have been investing for a long time, and am still not quite sure how I was not understanding the I Bond rate from the treasury web site. It was showing a rate over 7% when I bought it, now the calculator is showing 2%, more than just a little difference. I figured in both componants when I was evaluating the bond-fixed and variable, and I was amazed at its high rate. I am now amazed again, and can't wait to reach the 1 year mark so I can get rid of this junk!

[suedavids]

The rates change each 6 months depending on the inflation rate. You must have bought it at the high point with the Katrina effect and oil effect on these i-bonds. You probably bought at a 1% base rate and then you add the inflation rate. The rate went down but the base rate went up to 1.4% for this current time frame. So the next 6 months will have another rate and more than likely higher depending on inflation. i-bonds are inflation protection. If inflation is low and your base rate is low then the total rate is low.

To know exactly what yur bonds are getting you can download bond wizzard at the bond site.

[LuxLiving]

Just wanted to add in here that many of you said you buy online. I don't. I bought one online and just didn't like the feel of not having them in my hot little hands. I'm still old-fashioned enough to want to possess them myself personally! I went back to buying mine the old fashioned way at my bank.

~~LuxLivingFrugalis

[b4freedom]

Do you think this will force banks to push up the rates on CD's/MM's?

[suedavids]

It has no effect on C.D.'s and M M since they are different vehicals.
By the way, the I Bond is no longer 7 % . It is much lower. At the time it was higher, the base rate was 1%. Now that is is 2.41% much lower, the bonds issued during this period have a base rate of 1.40% rather than 1%.