Savings Bond Alert #032

Wednesday, April 16th, 2008
Categorized as: Savings Bond Alerts

Next I bond inflation component will be 4.83%

The next I bond inflation component will be 4.83%, up from the current 3.06%. The component is based on the difference between the Consumer Price Index in September (208.490) and March (213.528). The March CPI was released this morning.

To determine what your own I bonds will earn during their next six-month rate period, you have to add their fixed base-rate to the 4.83% inflation rate. The fixed-base rate for your I bonds can be anywhere between 1.0% and 3.6%, depending on when the I bond was issued.

Moreover, keep in mind that the new interest rate for your I bonds will not necessarily begin on May 1. Instead, new rate periods begin every six months starting with the month in which your I bond was issued. So, for example, an I bond issued in July begins new rate periods in July and January.

Because the Treasury doesn’t have public criteria for setting the fixed base-rate for new I bonds, it’s impossible to predict what the next I bond fixed-base rate will be. However, the Treasury appears to set the fixed base-rate for new I bonds about 1 percentage point lower than the rate on 10-year Treasury Inflation Protected Securities (TIPS). Yesterday, that rate was 1.28%, indicating that the new rate is likely to be 0.5% or less.

Given that the current fixed base rate is 1.20%, it would much better to invest in I bonds this month rather than waiting until May 1 or later. I bonds you purchase today will earn a composite rate of 4.28% for six months, followed by six month of 6.06%. These are much higher rates than are available in bank CDs or even other US Treasury securities.

However, TIPS rates, like Treasury rates in general, have been volatile because of the evolving financial crisis. You can follow the daily 10-year TIPS rate on the Treasury’s web site. If TIPS rates spike up or down between now and the end of April, it would impact the next I bond fixed base rate.

Also keep in mind that the Treasury changed the annual purchase limit on Savings Bonds in January to $5,000 per social security number per type of bond. This means you can invest $5,000 in paper I bonds at a bank and another $5,000 in electronic I bonds through Treasury Direct for a total of $10,000 per social security number.

Treasury reports indicate that new investments in Savings Bonds for the 2008 Fiscal Year (Oct-Sep) will be up from FY-2007. However, FY-2007 was a terrible year for Savings Bond investments – down 59% from the previous year. I bond rates after May 1, at 5%+, will appear attractive to novice investors. FY-2008 will be a better year for Savings Bond investments, but because of the annual limit investments will never again reach the amounts in FY-2002 and -2003, which were more than 2.5 times today’s levels.

Rate this post (1 to 5 stars):  1 Star2 Stars3 Stars4 Stars5 Stars
(Average rating: 4.09 stars)

FDIC Insured Certificates of Deposit can pay 1 or 2% more than savings bonds when held for a similar length of time. See top CD Rates Below:


On April 16th, 2008 Dan Habel said:

Love your up dates and news letter. I only wish you would sent Bond info out on a monthly basis rather that only ever 6 months. Thanks Dan Habel in Long Beach Ca

On April 16th, 2008 Bill Briner said:

Thanks for issuing this update so quickly. I’ve been watching for it.

On April 17th, 2008 F. Lumia said:

Great information, thank you.

On April 18th, 2008 Jeff from Great Neck said:

Effective 1/1/08 the Treasury reduced the limit of I bonds that may be purchased by an individual from $60,000 to $10,000. Ironically the new inflation rate will be about 4.83%. One must wonder what the Government really knows about inflation?
If in fact the inflation rate is 4.83% then the minimum 6 month rate on I bonds will be 5.83%+ (4.83%+1.0%) tax deferred with no state tax to pay ever. 6 mo CD’s pay 3.4% and 6 mo Treasury Bills pay 1.46%. There is a major disconnect which the Gov’t may have anticipated and therefore reduced the limits on I bonds.

On April 19th, 2008 Danny Pierce said:

This is a great site! Thanks so much for providing this info.

On April 20th, 2008 Susan said:

Tom, thanks for the update. I have a question for you.

It is not clear to me how the limits on purchasing I-Bonds apply. I would like to buy up to the $20,000 limit (for myself and my husband). If I buy bonds with both my and my husband’s SS numbers on them, can I buy 10,000 electronic and 10,000 paper bonds this way? Or do I have to buy 5,000 each for the two individual SS numbers (for a total of $20,000)?

Thanks, Susan

On April 21st, 2008 Vince Gallo said:


Currently, on my payroll deduction for I-Bonds, I list myself & my social security number as owner, with my wife named as co-owner. Under the new purchase limits, if I put the bonds under her name & social & me as co-owner, can we extend our purchases of I-Bonds to $10,400 for 2008?

Is there any chance that Treasury will increase the limit back up to $10,000 or higher anytime soon?


On April 21st, 2008 Tom Adams said:

Susan – To buy $20,000, you need to do half at a bank and half on TreasuryDirect.

You can do the bank part in one trip to the bank, but you need to do two transactions for $5,000 each (ie, you need to fill out the purchase forms twice) and put different SSNs on the two transactions. Only one SSN goes on a transaction, even if two names are listed on the bonds. So half the bonds can use your SSN and have your name as owner (and your husband can be co-owner, beneficiary, or left off – your choice); and the other half the same for your husband.

For the TreasuryDirect $10,000, it would be best to have two separate TreasuryDirect accounts and you each invest $5,000; however, if you only have one account I think you can buy $5,000 for yourself and $5,000 as a “gift” for your spouse. In this case your spouse would eventually need his own TD account to accept the gift.

Tom Adams

On April 21st, 2008 Tom Adams said:

Vince – if your employer will let you do that it would work. If not, you’d have to buy your wife’s half some other way than through payroll deduction.

Tom Adams

On April 21st, 2008 Susan said:

Tom, thanks for your quick reply. I also found a link to a TreasuryDirect FAQ that addresses related topics.

On April 22nd, 2008 Aramintha Grant said:

Thanks for the information on the latest on the inflation component of the I bond. I did the calculation for the new rate according to the formula provided in the documents at Treasury Direct but I was unable to get your answer for 6.06 % for the next six months. Could you send me your calculation by e-mail or perhaps post it on your website? Perhaps, I have made a mistake in my calculations.

On April 22nd, 2008 Tom Adams said:

Aramintha – 1.20% fixed rate plus 4.83% inflation component equals 6.03%. The other .03% comes from an inflation adjustment the Treasury makes to the fixed base rate.

The exact formula is:

2 * ((FixedRate / 2) + 
     (InflationRate / 2) +
     ((FixedRate / 2) * (InflationRate / 2))

Tom Adams

On April 22nd, 2008 Aramintha Grant said:

Thanks again, I discovered an error in my arithmetic and got your answer right away.

On April 23rd, 2008 Vince Gallo said:


Thanks again for all your help.

I’m still praying & holding out hope that Treasury will rescind the new limits on purchases & set policies to make U.S. Savings Bonds more attractive. God knows, this nation needs to save more, much more!

On April 24th, 2008 Mike said:


Sorry to burst your bubble, but the Treasury will never go back to the old limits. Why do you think they tax the income from savings at much higher rate than any other investments? They are not interested in people saving, rather they prefer that you go and spend your rebate check from IRS.

On April 24th, 2008 Karen said:

How do you know that the inflation component in 6 months will be 4.83%????? Is it published somewhere on the Treasury Direct site?

On April 25th, 2008 Tom Adams said:

Karen – the inflation component is based on a formula that uses the actual CPI-U index numbers for March and September. It’s just the percentage difference between them – times two (to convert to an annual rate). The Treasury won’t publish it until May 1. More information is here.

Tom Adams

On April 26th, 2008 Evelyn Janerico said:

How can I sign up for your E-mails? I did not see a link anywhere on the site. I might just have overlooked it or maybe I just don’t know what I’m looking for!

On April 28th, 2008 Tom Adams said:

Evelyn – If you don’t have an email address, you can sign up for the email newsletter here.

The company that hosts my web site and email gets complaints from AOL that I’m spamming people every time I send it out. The hosting company knows I’m not spamming but has asked me to remove all the subscribers.

Doing that every time I send it out is more work than I want to do, so I’ve just stopped taking new subscriptions.

Tom Adams

On April 29th, 2008 Rick said:

Hi Tom. Can Series I electronic Savings Bonds be redeemed after holding them for more than a year if living abroad at the time of redemption?

On April 30th, 2008 Tom Adams said:

Rick – I assume, but don’t know for sure, that you can log into TreasuryDirect from anywhere in the world. Assuming you can log in, you can redeem your bonds after one year (however, if you redeem before five years there’s a penalty of the most recent three months of interest).

The redemption money will go to the bank you have set up in TreasuryDirect, which must be a US bank.

Tom Adams

On May 1st, 2008 Bill Harrell said:

Guess I will not be buying I bonds in the next six months.

I Bond Earnings Rate 4.84%, Fixed Rate 0.00%

On May 1st, 2008 Rick said:

Hmmmm… If the redemption money from a Series I electronic bond is to be sent to just the particular bank that a person had set up in TreasuryDirect, it seems to me that this particular bond may not be as attractive as the Series I paper bond since that person may no longer have an account with that bank at the time of redemption.

On May 2nd, 2008 Tom Adams said:

Rick – it’s probably less trouble to set up an additional or different bank in TreasuryDirect than it is to cash a paper bond. In both cases you need a bank’s signature guarantee, but they’ll give you that for the TreasuryDirect form whether they handle Savings Bond transactions or not.

Tom Adams

On May 4th, 2008 ben doggett said:

will there be a new fixed rate for savings bonds on nov 1st of at least 1.2 % instead of the 0 % for i bonds? man if the govt would raise the fixed rate i think more people would buy them u know???

On May 5th, 2008 Tom Adams said:

Ben – Nobody knows.

Tom Adams

On May 15th, 2008 Bill Briner said:

Mr. Adams – If the U.S. Treasury is trying to kill the market for Savings Bonds, I believe they have finally succeeded ($5000 maximum purchase, 0% fixed I-Bond component and less than 2% interest rate for EE-Bonds). If they want to revive them, I think they should create a new TFI-Bond (Tax-free Inflation bond). Eliminate the fixed component, keep the inflation component and make them both federal and state income tax free. To whom would you suggest I send this suggestion?


Bill Briner

On May 16th, 2008 Tom Adams said:

Hi Bill – Send it to the Obama and McCain campaigns. The Bush appointees at the Treasury aren’t interested.

Tom Adams

Comments Closed

June 1, 2010

After six years, over 400 posts, 3,680 real comments, and over 90,000 spam comments (thank you, Akismet, for making managing a blog with comments possible), I am closing public comments on I will contine to update the main articles on this site, but not the comments.

Virtually every question about Savings Bonds has been asked and answered on this site multiple times. Use the search feature (see the box in the gray area near the top of this page) or the detailed menu on the lower part of the home page to find the information you're looking for. If you have a copy of Savings Bond Advisor, you can ask me a question here.

Tom Adams

Savings Bond Calculator


Savings Bond

Get an answer to your questions from the Treasury's Savings Bonds team.

Click below to ask a question.

Ask the Treasury


Invest online in Savings Bonds or
marketable Treasury securities.

Deal directly with the U.S. Treasury.

More info


Log in