Sunday, May 07, 2006

This new issue of I-bonds might be a good buy

The financial press that mentions I bonds at all (a scant few, admittedly) is complaining that the rates that got reset this month were low at a 2.41% are really low compared with prevailing interest rates of 4.5% or more. What they are ignoring is that the real rate went up from 1% to 1.4%. In the long run, the real rate is what you care about, since the inflation adjusted rate will fluctuated with CPI. This series of I bonds are a really good buy if you believe that inflation is going up in the long run (which I think is a good bet). If I hadn't already loaded up on them this year, I'd be buying more. In fact, this might indeed be motivation for me to go down to the local bank and buy paper I bonds. The rate resets again in October.
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