bank rates

Budget Fight Delays I Bond Calculation

Hand grabbing money out of a jarThe federal government shutdown has made it harder to predict how much Series I savings bonds will pay over the next six months.

Under normal circumstances, the U.S. Labor Department would have released today, Oct. 16, the latest Consumer Price Index data.

The September inflation statistics would have allowed us to draw a conclusion on what I Bonds will start paying on Nov. 1.

But the Bureau of Labor Statistics, which publishes inflation data, hasn’t updated its website since Sept. 30 and won’t do so again until after the federal budget stalemate is resolved.

Even if a debt ceiling/government funding deal is imminent, it’s unclear when the latest CPI information will be released. In a message on its website, the bureau wrote: “Revised schedules will be issued as they become available.”

There’s no real urgency yet since the Treasury Department isn’t scheduled to announce the official rates until Nov. 1. But for the last several years, it’s been easy to get a jump on the federal government’s announcement because the rate has been predictable.

I Bond returns are set based on the inflation rate for the prior six months and a fixed rate established by Treasury. The fixed rate is set for the life of the bond when you purchase it.

That rate has been zero since November 2010, and it will likely stay that way for a while, meaning once the inflation data is released, we pretty much know what new-issue I Bonds will pay until next spring.

I Bond rates have been on a steady decline over the past couple of years. From November 2011 to April 2012, they were paying as much as 3.06%.

Today, they pay 1.18%, an exceptionally low return even in this low-yield environment.

Six months ago, we wrote that I Bonds were no longer a good alternative to CDs.

That’s unlikely to change when the new yields are eventually released because the best 5-year certificates on our CD Rates Leaderboard pay more than 2%.

We compare I Bond returns to 60-month CDs because there’s a penalty of three months’ worth of interest if you redeem the bonds within the first five years.

Update: The federal government is back to work and the Bureau of Labor Statistics website is functioning, but the latest inflation data had not been released as of the morning of Oct. 17.

Update 2: The New York Times reports inflation data will be released Oct. 30, just two days before Treasury sets the new I Bond rates.

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