5/1/09 Update:  Current I Bond Earnings Rate is 0.00%, Fixed Rate 0.10% I Bonds Explained  iBond Rate History New I-Bond Composite Rates DATE FIXED RATE* MAY 1, 2009 0.10% NOV 1, 2008 0.70% MAY 1, 2008 0.00% NOV 1, 2007 1.20% MAY 1, 2007 1.30% NOV 1, 2006 1.40% MAY 1, 2006 1.40% NOV 1, 2005 1.00% MAY 1, 2005 1.20% NOV 1, 2004 1.00% MAY 1, 2004 1.00% NOV 1, 2003 1.10% MAY 1, 2003 1.10% NOV 1, 2002 1.60% MAY 1, 2002 2.00% NOV 1, 2001 2.00% MAY 1, 2001 3.00% NOV 1, 2000 3.40% MAY 1, 2000 3.60% NOV 1, 1999 3.40% MAY 1, 1999 3.30% NOV 1, 1998 3.30% SEP 1, 1998 3.40%   The earnings rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the life of the bond, and the semiannual inflation rate. The 0.00% earnings rate for I bonds bought from May through October 2009 will apply for their first six months after issue. The earnings rate combines a 0.10% fixed rate of return with the -5.56% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). When the inflation rate is less than zero, a bond's earnings rate is less than its fixed rate (but the earnings rate is never less than zero). The fixed rate applies for the 30-year life of I bonds purchased during this six-month period. The CPI-U decreased from 218.783 to 212.709 from September 2008 through March 2009, a six-month change of -2.78%.  Inflation Bond Facts: I Bonds earn interest from the first day of their issue month. You can redeem them at any time after a twelve-month minimum holding period They are an accrual-type security They increase in value monthly and the interest is paid when you redeem the bond I Bonds are sold at face value; i.e., you pay $50 for a $50 I Bond I Bonds grow in value with inflation-indexed earnings for up to 30 years If you redeem I Bonds before they’re five years old, you’ll forfeit the three most recent months’ interest; at or after 5-years old, you won’t be penalized. *Annual rates compounded semiannually Maximum purchase (per calendar year): $5,000 in TreasuryDirect and $5,000 in paper bonds I bond fixed rates are determined each May 1 and November 1. Each fixed rate applies to all I-bonds issued in the six months following the rate determination.
The earnings rate for Series I Savings Bonds (aka iBonds and I-Bonds) is a combination of a fixed rate, which applies for the life of the bond, and the semiannual inflation rate.  Here's how the composite rate for I bonds issued Nov 2008 - Apr. 2009 was set: Fixed rate = 0.70% Semiannual inflation rate = 2.46% Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)] Composite rate = [0.0070 + (2 x 0.0246) + (0.0070 x 0.0246)] Composite rate = [0.0070 + 0.0492 + 0.0001722] Composite rate = [0.0563722] Composite rate = 0.0564 Composite rate = 5.64% Article: Beware of Annuities
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