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  • They finally increased the fixed rate, from 0 to 0.4%
  • edited November 2022
    That fixed/base rate is low at 0.40%, IMO. The 5-yr TIPS/real rate is 1.60%. The 5-yr TIPS looking a better deal (next auction 12/22/22; buy anytime in the secondary market).
  • For previously bought I-Bonds, the new rates will be,
    image
  • Does this mean that only those who purchase after Oct 31, 2022 get the benefit of the 41 bp fixed rate addition? The rest of us get only 6.48%.
  • JD_co said:

    Does this mean that only those who purchase after Oct 31, 2022 get the benefit of the 41 bp fixed rate addition? The rest of us get only 6.48%.

    Yep! The fixed rate at purchase remains forever (well, 30 years).
  • Not trying to change the topic. Treasury department sold $980 millions I bond before Oct 28th deadline. Imagine if there is NO investment limit and you can do transaction on your favorite brokerages.
  • edited November 2022
    It's certainly a good short-term investment, but a lot depends on whether or not we enter a recession to make it a good long-term one. If the CPI goes down instead of up, it's dead money paying nothing. But in the short-term, it's hard not to like 6.5% with no downside risk for those who bought before October 28.
  • Alert on #IBonds, 1/12/23
    While the current 6.89% rate will apply to I-Bond purchases until 4/28/23 (rate valid for 6 months from the purchase date), the preliminary projections for the next rate on 5/1/13 are for only 0-1%. About the half of the #CPI data needed for 5/1/23 rate is in, and inflation is trending down. I-Bonds that are 12+ months old after 5/1/23 may be sold with 3-mo interest penalty.
    https://ybbpersonalfinance.proboards.com/thread/209/savings-bonds-6-months-nov?page=4&scrollTo=897
  • The minimum holding period is one year. No one really know if inflation get down to 2% in the next 12 months, but it is unlikely going from November’s 7.1%. After 12 months one can sell I bonds and lose the last 3 months of interest. Personally I can live with that small penalty. The other play on CPI is to buy TIPS at auction and @yogibearbull has covered this topic.
  • The 3 month penalty (after holding for 1 year) and limited investment caps are a killer. Sure, it was "fun" getting 9.62% for 6 months, then "ok" getting 6.48% for another 6 months.... but then it's time to look at an exit strategy.

    Having to eat 3 months interest upon withdrawal is clearly meant to keep short-timers (like me) away. This investment probably wasn't worth the bother.
  • If the rate is high for twelve months (you're getting a blended 12 month rate of around 8.4%), then the penalty is almost meaningless. Hold the savings bond for 15 months and you get that 8.4% for 15 months instead of 12, which is still around 6.7% annualized.

    That penalty wasn't a deterrent with rates so high. It's likely to be one going forward as
    rates for upcoming 6 month periods drop back down to "normal".
  • If the rates become very low, then the penalty will be much easier to accept. for example if the rate were 2%, the 3 month interest penalty on your $10,000 I-Bond would be $50.
  • 8.4% interest is very respectable. Thus we will go for it this year. Don’t think we get back to 2% inflation in 2023.
  • @sven, I-Bond rate on 5/1/23 will be determined by the CPI index change from 09/2022-03/2023. The 3 month change from Sep-Dec so far is near 0% and changes over the next 3 months aren't expected to add much. What you see reported are CPI yoy change and that was +6.5% in Dec, but that isn't how the I-Bond rate is determined. That is what my alert is about - you could very well have +4% to +5% reported CPI (yoy change) around May 2023, but still have 0-1% rate for I-Bonds. You will then read media articles explaining why that is.
  • edited January 2023
    According to Tipswatch, non-seasonal inflation usually picks up from January to March.
    Consequently, the May 1 variable rate for I Bonds might not be heading to 0.0%.
    We'll see what happens...
    Link
  • Sven said:

    8.4% interest is very respectable. Thus we will go for it this year. Don’t think we get back to 2% inflation in 2023.

    already are, almost; go study the econ threads listed within the inflation thread here

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