I-Bonds Fixed Rate Pre-Guess for November 2007
I have written off I-Bonds as an attractive investment or even as a substitute for a 1-year CD. In case someone is still interested in I-Bonds, here is my pre-guess for the fixed rate to be announced on November 1, 2007.
For the inflation adjustment part, we have 5 out of 6 months of inflation data. If the September CPI comes out on October 17 at the same level as in August, the semi-annual adjustment will be about 1.25%.
For the fixed rate part, I use the 5-year TIPS real yield as reference. The current 5-year TIPS real yield is about 2.2%. It was 2.06% on April 30, right before the previous announcement. My guess is that the I-Bonds fixed rate will stay the same at 1.3%, or go up to 1.4% if the Treasury department feels generous.
All together, the composite rate will be 3.8% – 3.9%, still lower than many other alternatives. Another big yawn.
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