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I'm kind of an idiot with anything terribly elaborate in the financial world, so forgive a bit of a dumb question: what are the downsides to bonds instead of using something like a CD?
The bond usually has a much lower yield because it is safer.
Does anyone want to explain why this is an interesting story?
Explainer from a different page: https://www.investopedia.com/best-savings-bonds-5196440 which had the rate of 3.54% as of August. Presumably it's shot up due to inflation estimates. In which case you should probably buy some immediately if you have spare cash and want a risk-free return and meet the other criteria.
I used to have the UK equivalent until the particular product was phased out, but it appears that a newer version is available.
Does anyone want to explain why this is an interesting story?
Proof that the inflation we are experiencing is structural not transient.
Furthermore, because these are the direct rates (e.g. for new bonds purchased from US government offerings), they're whatever the US government decides (in this case, CPI calculated).
What you're probably confusing is post-issue market bond rates, which would be indicative of the market's opinion of future inflation.
> We set the inflation rate every six months (on the first business day of May and on the first business day of November), based on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy.
I'm kind of an idiot with anything terribly elaborate in the financial world, so forgive a bit of a dumb question: what are the downsides to bonds instead of using something like a CD?
I bonds in particular cannot be cashed out before 12 months, and before 5 years there is a penalty. Bonds are not covered by FDIC insurance and can default (though less relevant for US Treasury bonds which can print USD and more relevant for corporate/foreign bonds).
For those of us who were confused (like me), this is not a treasury bond, but a real return bond. It pays interest based on a posted rate, plus additional interest to cover inflation for a period. The inflation rate will change twice a year based on inflation.
For those of us who were confused (like me), this is not a treasury bond, but a real return bond. It pays interest based on a posted rate, plus additional interest to cover inflation for a period. The inflation rate will change twice a year based on inflation.
I'm kind of an idiot with anything terribly elaborate in the financial world, so forgive a bit of a dumb question: what are the downsides to bonds instead of using something like a CD?