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I have been trying to determine the CPI-U, to calculate the relative benefits of I-Bonds, TIPS and conventional Treasuries.

The CPI-U, which is used for calculating I-Bond interest rates, is on:
http://www.publicdebt.treas.gov/sav/sbirate2.htm

This page states: "It is the percentage change in the Consumer Price Index for all Urban Consumers (CPI-U) over six months." But, they don't say which six months.

The table of monthly % change of CPI-U is found at:

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CUUR0000SA0&output_view=pct_1mth

It appears that the Treasury adds together the 6 months that end with the month before the announcement. The announcement on May 1 uses the sum of six monthly inflation rates, from October through March. The announcement on Nov. 1 uses April through September.

However, the summed BLS numbers don't match up exactly, with the Treasury numbers.

How does Treasury calculate the CPI-U they use?

The May 1, 2006 inflation rate of 0.5% will be applied to all savings bonds and TIPS that are issued until Nov. 1. Since this rate applies to the first 6 months of a bond, a savings bond that is bought in October 2006 will add this inflation rate (0.5% x 2) to the fixed rate (1.4%), giving a total rate of 2.4%, until April 2007.

A TIPS that is bought in October 2006 will have its principal adjusted upward by 0.5% in April 2007...right? Bloomberg lists the current 5-year TIPS rate at 2.37%.

We are halfway to the inflation figure that will be used for the Nov. 1 announcement (Apr-Jun 2006). So far, the sum of the inflation % increase of Apr-Jun 2006 is 1.6%. Quadrupling that, to get an annual rate, that would be 6.4%.

The implied inflation rate of the 5 year TIPS is 2.54%.
http://www.bloomberg.com/markets/rates/

Corus Bank is offering a 6-month CD, yielding 5.50% (APY 5.64%).
Everbank has a 3-month introductory net banking rate of 5.51%.

Now, I am really confused. What do do, with maturing CDs?

Wendy

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