Looking at it further, there's a quirk with the rounding off of the interest every 6 month period, where they round down one month and up on the other five.

It may have rounded down on the first month for whatever reason, rather than the second (as they did in the first six months).

Suppose it's possible it still comes out the same if they round it up the next five months.

Any updates on how the next reset will look wtih inflation still raging out of control?

I'm wondering if they will prop up the fixed rate to compete with t-bills.

Ag CPA said:

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I'm wondering if they will prop up the fixed rate to compete with t-bills.

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What would be the motive for this?

topher06 said:

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Any updates on how the next reset will look wtih inflation still raging out of control?

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This is a good question. If it goes too much lower, moving to tbills would make more sense

AggieMainland said:

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topher06 said:

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Any updates on how the next reset will look wtih inflation still raging out of control?

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This is a good question. If it goes too much lower, moving to tbills would make more sense

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Unless you're looking to avoid taxable income until some point in the future when the i bonds are sold.

Bro, this is TexAgs, we all make at least 10x (poorest among us only) the income limits to do the non-tax thing.

topher06 said:

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Bro, this is TexAgs, we all make at least 10x (poorest among us only) the income limits to do the non-tax thing.

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LOL that's my point. The more you make, the less you want additional income now.

With new CPI data, looks like new rate is going to be 3.39%. As I look at this against CD rates, and factoring in the 3 month early redemption penalty, it looks like these are going to turn out to be under performing investments. It's small dollar amounts, so not a big deal, but math is a funny thing.

6 months at 6.49% + 3 months at 0% calculates at only about a 4.3% yield. And certainly, the longer you hold at the new lower yield, and then incur the 3 months at 0% makes it much worse. With the current downward trajectory of CD rates, it's even worth considering if holding for the full 3 months into new rate is even beneficial.

I think this lends credibility to the opinions that the lower yielding purchases with a guaranteed base may prove to have been the better option.

Again, this is small dollar variances, but I believe it has been an interesting concept to follow. We haven't seen this type of interest rate and inflation dynamic for decades.

I belive you have to hold for 12 months, no?

Yes, which will result in further erosion of this investement (6 months at 6.49, 3 months at 3.39, and 3 months at 0%) for those who bought late in the last cycle. Just over 4% yield for a year.

Yeah, i think its close to time to get out of ibonds. As someone who got in December 2021, I've been very happy with ibonds. Others who got in late might not be as pleased.

FWIW I think that is just the variable piece but even with the fixed the rate is probably going to drop below 4%:

https://www.cnbc.com/2023/04/12/series-i-bond-returns-may-drop-below-4percent-in-may-according-to-experts.html

I just set up my Treasury Direct account but reading the last few posts makes me hesitate

why create yet another account (I have 5 different investment vehicles already after a 25 year legal career)

just to have a 4% return when I can probably get that from TBills and bonds on my Fidelity Brokerage?

this looks pretty interesting:

BEST CORPORATE BOND ETF FOR INFLATION
iShares Inflation Hedged Corporate Bond ETF (LQDI)
Expense Ratio
0.18%

Dividend Yield
3.37%

3-Year Avg. Annualized Return
6.60%

The iShares Inflation Hedged Corporate Bond ETF is an actively managed, intermediate-term corporate bond fund suitable for income investors worried about inflation.

LQDI's portfolio includes both shares of the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and inflation swap derivative contracts. The fund aims to track the returns of the BlackRock Inflation Hedged Corporate Bond Index, an index created to offset the inflation risk of investment-grade corporate bonds.

As with any bond investment right now, you should be prepared for shorter-term pain due to rising interest rates, but over the long term, LQDI is designed to smooth out the negative effects of inflation. During the prior two and four years, the fund has handily outperformed the Bloomberg Barclays U.S. Corporate Bond Morningstar category index.

Ag CPA said:

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FWIW I think that is just the variable piece but even with the fixed the rate is probably going to drop below 4%:

https://www.cnbc.com/2023/04/12/series-i-bond-returns-may-drop-below-4percent-in-may-according-to-experts.html

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You get whatever the fixed piece was when you initially bought. If you bought last issue, you get an extra 40 bps for life... This next issue will be determined in May. The couple before that that had the super high rates where at 0 fixed.

Thanks, that makes sense.

what about these "EE" bonds instead of the "IBonds"?

or a mix of both of them?

Treasury website claims they will double your investment in 20 years with the EE Bonds

just purchased 50K

Issuer and CUSIP: GOLDMAN SACHS BANK USA (CD9GOL)


As of 04/17/2023 12:00 AM ET Show details about New Issue Certificate of Deposit New Issue Certificate of Deposit

GOLDMAN SACHS BANK USA--
Offer Price
100.000Maturity Date
01/26/2024 Yield to Maturity (%)
4.8% Coupon (%)

LMCane said:

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what about these "EE" bonds instead of the "IBonds"?

or a mix of both of them?

Treasury website claims they will double your investment in 20 years with the EE Bonds

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EE bonds earn a fixed rate (2.1% right now) for the first 20 years. At year 20, if the price hasn't doubled (it won't have), they add the funds necessary to make the value double what you put in. So if you put in $10k (the annual individual max), it is guaranteed to be worth $20k after 20 years. That's an effective interest rate of 3.53%. If you cash out early, you get to keep what you've accrued, but only at 2.1%. You can hold for up to 30 years, and don't recognize the tax gain until the year you redeem, or year 30.

Some people like to use these as a type of DIY annuity. In other words, you can buy a certain amount each year and create a stream of guaranteed income each year, as long as you don't cash out early.

Ag06Law said:

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LMCane said:

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what about these "EE" bonds instead of the "IBonds"?

or a mix of both of them?

Treasury website claims they will double your investment in 20 years with the EE Bonds

---

EE bonds earn a fixed rate (2.1% right now) for the first 20 years. At year 20, if the price hasn't doubled (it won't have), they add the funds necessary to make the value double what you put in. So if you put in $10k (the annual individual max), it is guaranteed to be worth $20k after 20 years. That's an effective interest rate of 3.53%. If you cash out early, you get to keep what you've accrued, but only at 2.1%. You can hold for up to 30 years, and don't recognize the tax gain until the year you redeem, or year 30.

Some people like to use these as a type of DIY annuity. In other words, you can buy a certain amount each year and create a stream of guaranteed income each year, as long as you don't cash out early.

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thanks that is good information right there

I went with buying 4.8% yields on GS investments for 9 months

will have to then buy something else in early 2024.

4.3%

https://www.cnbc.com/2023/04/28/series-i-bond-rates-fall-to-4point3percent-amid-cooling-inflation.html

What is the one year yield on i bonds if I purchase today? 6.23%?

That'd be the APY for 6 months, then change to the new rate for the next 6.

Your yield would be the average of those two rates.

I got my math wrong. 5.59% is the one year return if I purchase today. ((1.69 * 2) + .9 + 6.89)/2

This is better than I expected. I need to think of an exit strategy out of ibonds but i'll sit still for now.

Ag CPA said:

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4.3%

https://www.cnbc.com/2023/04/28/series-i-bond-rates-fall-to-4point3percent-amid-cooling-inflation.html

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For new purchases only.. this includes 90 bps base rate

P.H. Dexippus said:

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I got my math wrong. 5.59% is the one year return if I purchase today. ((1.69 * 2) + .9 + 6.89)/2

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If you purchase today you don't get the 0.90.. you get 0.40 forever. 0.90 is for purchase after may1, in which case, you don't get the 6.89.

True, always forget about that. So not quite as simple as the average.

Unfortunately for me, I'm stuck with the 0.0% rate. Probably gonna consider selling after three months at the new rate if stocks are cheap then.

This will be one of the lessons we learn because we haven't lived through it for over 3 decades. But in hindsight is great. As those rates were for those few 6-month periods, the base rate is the more important part of buying these bonds.

Thanks. So ((1.69 * 2) + 6.89)/2 = 5.14%. Meh.

P.H. Dexippus said:

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Thanks. So ((1.69 * 2) + 6.89)/2 = 5.14%. Meh.

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Again, you are leaving out the 3 months at 0 to get out.

And that APY includes the 3 initial months at 0, btw.