# BUYING SERIES I BONDS? IF SO, DO IT RIGHT AWAY

Thinking about buying some of the new inflation-indexed savings bonds, known as Series I bonds?

Consider buying them today or Wednesday, so you can lock-in the current rate of 5.92 percent for the next six months.

Series I bonds that you buy on or after Thursday will probably earn less, said Daniel J. Pederson, author of "Savings Bonds: When to Hold, When to Fold, and Everything In-Between."

The Series I bond, introduced in September 1998, generally works like most other bonds in the government's savings-bond program. You hand over some money (a minimum of \$50) and the government issues you a certificate (the I bond). The government credits your bond with interest each month. When you cash in your bond, you get back your principal plus accumulated interest.

The interest rate that Series I bonds pay is made up of two pieces. One is a variable rate that can change depending on inflation. The other is a fixed rate, which guarantees you a specific return over and above the rate of inflation.

Right now, the variable rate is 2.88 percent on an annualized basis. The fixed rate is 3 percent. When you combine the two, and take compounding into account, the I bond's current rate is 5.92 percent on an annualized basis.

If one or both of these rates fall Thursday, Series I bonds will be less attractive than they are now.

The government sets a new variable rate every six months, each May 1 and Nov. 1. Because inflation has been so low lately, the new variable rate the government will announce on Thursday will probably drop, said Pederson, who is also president of The Savings Bond Informer of Detroit, which calculates bond values and sells other services to bondholders.

So if you buy now, you'll lock in that variable rate for the next six months -- but only for six months; after that, you'll get whatever the current variable rate is.

The government may also drop the fixed rate soon, perhaps as soon as Thursday, Pederson said. Why? Because Series I bonds now are paying far more than similar conservative, fixed-income type investments.

So if you buy before Nov. 1, you are guaranteed to get a fixed rate of 3 percent for 30 years, plus an inflation adjustment set every six months.