New I-Bond Variable Rate, 10/12/23
Semiannual inflation rate 1.9723%
Composite rate = b + 2f + bf, where b is the base/fixed rate (annual), f is the semiannual inflation rate.
Base/fixed rate should go up from 0.90% to 0.90-1.5% (compare with the current 5-yr TIPS rate of 2.39%)
So, the estimated I-Bond rate range for 11/1/23 is 4.86-5.47%.
The actual I-Bond rate will be posted on 11/1/23.
https://ybbpersonalfinance.proboards.com/post/1209/thread
Comments
https://tipswatch.com/2023/10/08/the-i-bonds-fixed-rate-will-rise-but-by-how-much/ He goes on to suggest two ways of guessing the next rate:
He discusses his thinking in detail. He also has a followup in the posts on the page. There he says that real rates have dropped significantly in the last week (since he wrote the piece), making a 1.2% fixed rate more likely than a week ago.
Regardless, I bonds don't look like a good substitute for a short term 1-year T-bill. That would yield roughly
½ x 4.3% + ¼ x 5.5% (guess) ≈ 3.5% (after 3 mo penalty)
So if you sell at the beginning of a month you've only lost a day's interest (for that month). But if you sell near the end of the month, you get nothing for those 30 days or so.
It is better to sell them at 6 month intervals from the purchase date to make full use of current rates.
That works if you're out of the penalty period (savings bonds held for at least 5 years). If you're subject to a 3 month penalty, then it's better to hold the bonds for 3 months past the final month of the old rates. That way, you get the full use of the older (presumably higher) rates. You just lose 3 months interest at the new (presumably lower) rate.
https://keilfp.com/blogpodcast/when-to-cash-out-i-bonds/#When_Should_I_Cash_Out_My_I_Bonds