Savings Bond Alert #027
Thursday, January 18th, 2007
Categorized as: Savings Bond Alerts
Inflation running at 2.5% year over year, but CPI still down from September
December’s CPI of 201.8 was up 2.5% from a year ago and it was up .15% from November’s level. However, it’s still below September’s 202.9, which is the number I bond investors watch. That’s because the I bond inflation component is based on the level of the CPI in March and September.
To get above September’s level by March, inflation’s pace will have to quicken. If it doesn’t, I bonds may see their first negative inflation component.
Investors already seem worried about the possiblity. Since the government’s fiscal year began in October, new investments in Savings Bonds have barely recovered from the all-time lows seen over the summer.
With the first three months of the government’s fiscal year (October through December) complete, new investments in Savings Bonds are running at an annual rate of $3.87 billion, which is the slowest rate of new investments in years.
Investors are putting only about 46% of their new investments into I bonds, with the balance going to EE bonds. This is a significant reversal, as I bonds had outsold EE bonds every year since 2001.