I-Bond Rate for November 2009 – May 2010 Is 3.36%

The last time I wrote about I-Bond interest rate was last May when the Treasury Department set the total earning rate of Series I-Bond issued from May to November to 0.00% due to the negative annual inflation rate, which has already affected the contribution of 2010 401(k) plan.

Even though that I-Bonds purchased in the past six months didn’t earn me anything, I still kept my monthly purchase of $100 I-Bone intact because the investment was made through an automatic purchase plan and I was too lazy to cancel the orders that I planned for many years. Plus, since most savings account interest rates were below 2% during that period of time, it wouldn’t make much difference if I put the $600 somewhere else. So I decided to avoid the hassle and stick to my plan.

Now, six months later, a new I-Bond rate is announced for the next six months from November 2009 to May 2010 and it is too bad, at least for six months. According to the Treasury, the total earning rate for I-Bonds from November 2009 to May 2010 is 3.36%. The rate for I-Bonds consists of two part: A fixed rate plus an inflation adjusted rate. Of the 3.36% rate, 0.30%  is fixed throughout the life of the bonds, which is 30 years.  The inflation adjusted rate is 3.06%, not too bad but it lasts only 6 months.

I have been buying I-Bonds for more than 6 years, but I never maxed out (I believe putting the money in the stock market will give me a better return). Since I don’t have any bond mutual funds in our taxable investment accounts, I treat the I-Bonds I own as the fixed income portion (which they really are BTW) of our investment portfolio, even though I never really considered it in the asset allocation. However, I do want hold them for the long term :)

Update: The I-bond interest rate from May 2010 to October 2010 is 1.74% APY.

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3 Responses to “I-Bond Rate for November 2009 – May 2010 Is 3.36%”

  1. Financial Samurai |  Nov 05, 2009 at 11:25 pm

    Cheap money is here to stay! There is absolutely NO inflation on the horizon.

  2. joyce |  Apr 07, 2010 at 10:45 am

    Inflation is coming. Too many facades have been put forth by the Administration.
    Reality will set in and the IBOND,even though the rate is low 3.??, it’s a hedge against inflation and it’s better than the banks and most CDs. In the end, the stock markets ok, but I like the idea of the IBOND. It gives my portfolio balance. Again, lesson learned. Don’t put all your eggs in one basket. I never have but I have been hurt in the market three times – Anderson Scandal, 9-11, and this fiasco.