The EE rate is set at 90% of the average of 5-year T-note rates over the previous six months. Right now this average is around 3.6% and will keep falling over the next couple of weeks (fives are yielding 2.91% as I write this). So count on EE rates of around 3.15%.

The fixed portion of the I rate will almost certainly fall from the current 2%, among other reasons because bond rates have fallen across the board over the past six months. The floating portion should increase, however, because the CPI for the recent period has increased faster than it had from last October to March.

When the September CPI comes out in a couple days it'll be possible to compute the floating portion exactly, but right now it looks like it'll be in the range of 2.5-3%.

So if the fixed part drops to 1.5%, the overall I rate will be low 4s. Although this is higher than the current I rate of 2.57%, that's illusory because existing I bonds (that have higher fixed portions) will get the higher floating portion eventually.

Moral: buy the bonds before October's out, and DO NOT flip your existing I's because you'll lose the higher fixed part. You have my permission to flip EE's, though, not that I'd do it myself.

BTW, it's possible to flip bonds on your credit card without losing ANY interest, which is left as an exercise for the reader.

Whew, that's my smart post for the week.


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LastClass... formerly Frequent Freak