Savings Bond Alert #022

CPI up, Savings Bond investments down, future US credit rating questioned

June's prices were up 4.3% from a year ago, the Bureau of Labor Statistics announced this morning. The Series I bond inflation component is based on the difference between the March and September levels of the Consumer Price Index. If prices rose no farther, the next I bond inflation component would be set at 3.10%. At the other extreme, if inflation for the six-month Mar-Sep period matches the rate of the first three months, April through June, the next I bond inflation component would be 6.21%. For more information on how inflation affects I bond rates, see our monthly Inflation update.

New Savings Bond investments in June dipped to the lowest level in several years. Fewer dollars were invested in Series I Savings Bonds than Series EE bonds for the first time since EE bonds were given fixed rates in May 2004. For more information, see I bond investments drop below EE level in June.

Standard & Poor's, which, among the many things it does, gives credit ratings to governments, has released a study called Global Graying that says aging populations are a credit risk to most industrial governments, including the US. Moreover, the study poses a scenario in which central bankers might allow inflation to reach a level of 20% a year as an "inflation tax" to help governments deal with their debt burdens. There's more on S&P's Global Graying reports at US credit rating could drop within 10 years, Credit rating agency says US fiscal readiness deteriorating, and Coordinated central bank "inflation shock" posed by S&P scenario.

Redemption before one-year and expedited processing of lost bonds are available to victims of flooding in the northeast under a Treasury disaster relief program. For more information, see Early redemption available to flood victims in northeast.

Other stories on the Savings Bond Advisor web site in the last month include:

• Wall Street Journal questions TreasuryDirect security
• Harvard prof suggests reinventing Savings Bonds
• Should I cash Savings Bonds to pay off a loan?
• Why and how to avoid income lumps