US Series I Savings Bonds Now Yielding 7.12% • Hacker News Board

Re: US Series I Savings Bonds Now Yielding 7.12%

#101

Post by awakeasleep » Mon, Nov 01, 2021, 3:27 PM UTC

mudil wrote: post #82

nwvg_7257 wrote: post #36

This doesn't mean what people think it means. They adjust the inflation rate every 6 months https://www.treasurydirect.gov/indiv/research/indepth/ibonds... . Right now it yields 7.12% because the last inflation number was really high, but once inflation goes back to normal, the yield will be much lower.

but once inflation goes back to normal is not a fact. The future is uncertain, ie hyperinflation is possible.

Hyperinflation refers to a very specific event where a country has no exports at all, and is also not self-sufficient with food production.

We could experience very high inflation, but hyperinflation is becoming a random word that people throw around without understanding the definition.

Re: US Series I Savings Bonds Now Yielding 7.12%

#102

Post by jonathankoren » Mon, Nov 01, 2021, 3:27 PM UTC

mc32 wrote: post #81

newacct583 wrote: post #64

Earlier quoted context omitted.

We would not be "in the Cater [sic] Years" regardless. The lowest inflation reported in the late 70's was about 5%, with a peak at 15%. Last year's post-covid number was 5.4%. Your point seems mostly like demagoguery. I think the more interesting question is... is 5% actually bad? There's a real argument to be had here that rapid inflation reflects genuine improvements like rising wage levels and that it's worth payi…

I don't think the financial system of the 70s is the same financial system of the 2000s. We were were also pouring a lot of resources into countering the 'second world' including the Vietnam war, missile defence, etc. add to that the 'oil shock.' As far as I can recall, the current system is 'calibrated' for 2-3% annual growth. 5-8% is entering the banana republic inflation zone. You, know, where they'd have to 'deva…

> As far as I can recall, the current system is 'calibrated' for 2-3% annual growth. 5-8% is entering the banana republic inflation zone.

This is simply untrue. Like not even close the definition of hyperinflation used by economists. Hyperinflation is a monthly inflation rate of 50%, or 12974.63% annually.

This is scare tactics.

Re: US Series I Savings Bonds Now Yielding 7.12%

#103

Post by loeg » Mon, Nov 01, 2021, 3:27 PM UTC

999900000999 wrote: post #68

Any real risk in dumping 10k in these and forgetting about it for a decade. Have these ever lost money ? 7% yield is outrageously good assuming you can't lose money. Then again US currency might be worthless if they default on these.

The 7% is adjusted every six months to match inflation. The real inflation-adjusted yield on these is 0.0%. It’s better than cash, but has some short term redemption restrictions.

Re: US Series I Savings Bonds Now Yielding 7.12%

#104

Post by seniorThrowaway » Mon, Nov 01, 2021, 3:28 PM UTC

I bought one in the early 2000's, should be getting about 10% on it. The trouble with these is that the fixed rate has been 0% for some time now. If inflation does go down you could end up with a very low yielding bond. I forget what exactly it equates to on a yearly interest basis but series E bonds don't really pay squat until they hit the 20 year mark, at which time they are guaranteed to double. I wish when I was younger I had put the max into those each year I was able to, that's a nice little "pension" when you are older.

Re: US Series I Savings Bonds Now Yielding 7.12%

#105

Post by rsync » Mon, Nov 01, 2021, 3:28 PM UTC

newacct583 wrote: post #64

mc32 wrote: post #41

Earlier quoted context omitted.

Right. The real question is : when will it abate? Is it transitory as they unflinchingly claimed or are we in the Carter Years?

We would not be "in the Cater [sic] Years" regardless. The lowest inflation reported in the late 70's was about 5%, with a peak at 15%. Last year's post-covid number was 5.4%. Your point seems mostly like demagoguery. I think the more interesting question is... is 5% actually bad? There's a real argument to be had here that rapid inflation reflects genuine improvements like rising wage levels and that it's worth payi…

"Remember that the "biggest losers" in inflationary economies are people who hold assets, not investors ..."

The biggest losers among sophisticated, moneyed actors are indeed people who hold assets.

But the biggest losers overall are those with fixed incomes dealing with rapidly rising prices.

Re: US Series I Savings Bonds Now Yielding 7.12%

#106

Post by driverdan » Mon, Nov 01, 2021, 3:28 PM UTC

stronglikedan wrote: post #44

rajup wrote: post #8

Earlier quoted context omitted.

But the rate is only for 6 months and limited to $10000 per SSN per year, which does not make it terribly useful.

seems very useful for a $10k investment, if it's going to make a considerable amount for that $10k.

It's breaking even based on the current rate of inflation. It doesn't yield any positive returns.

Re: US Series I Savings Bonds Now Yielding 7.12%

#107

Post by cornstalks » Mon, Nov 01, 2021, 3:29 PM UTC

rashkov wrote: post #80

nwvg_7257 wrote: post #36

This doesn't mean what people think it means. They adjust the inflation rate every 6 months https://www.treasurydirect.gov/indiv/research/indepth/ibonds... . Right now it yields 7.12% because the last inflation number was really high, but once inflation goes back to normal, the yield will be much lower.

Some interesting charts on this page. The 7.12% rate consists of a 0.00% fixed rate and a 3.56% inflation rate. The formula is: Composite rate = [fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)] 7.12% = [0.0000 + (2 x 0.0356) + (0.0000 x 0.0356)] This rate is only valid until the inflation rate gets re-adjusted after 6 months. There is an interesting chart showing what the fixe…

> invest $40k earning 7.12% for at least 6 months

I'm sure you know this so this comment is more for the casual reader: "I bonds earn interest for 30 years unless you cash them first. You can cash them after one year. But if you cash them before five years, you lose the previous three months of interest."[1]

Worth keeping in mind these aren't really short-term investment vehicles. But earning 2x inflation rate is pretty decent for a low-risk investment.

[1]: https://www.treasurydirect.gov/indiv/research/indepth/ibonds...

Re: US Series I Savings Bonds Now Yielding 7.12%

#108

Post by ryandrake » Mon, Nov 01, 2021, 3:29 PM UTC

999900000999 wrote: post #68

Any real risk in dumping 10k in these and forgetting about it for a decade. Have these ever lost money ? 7% yield is outrageously good assuming you can't lose money. Then again US currency might be worthless if they default on these.

I have TreasuryDirect set up to purchase $X in I-bonds quarterly. It's been set and forget. I consider them the "medium term" component of my emergency fund, rather than an investment I expect significant yield from. They generally perform better than CDs, worse than corporate bonds, and are inflation protected. They're not too bad tax-wise either. The interest is subject to Federal income tax but not state or local tax. All of the above have their place in a well-diversified savings strategy.

Re: US Series I Savings Bonds Now Yielding 7.12%

#109

Post by loeg » Mon, Nov 01, 2021, 3:29 PM UTC

squidproquo wrote: post #78

This is not a great investment. It's pays it's base rate (0.0%) plus inflation (7.12%). The rate is based on inflation and is reset every 6 months, and I'm assuming the base rate of (0.0%) doesn't change. It may make sense for some people who are risk-averse and already have savings in a bank account that is getting demolished by low rates and high inflation.

Right, the base rate never changes for the life of the bond, and it generally outperforms cash while also being zero-risk.

Re: US Series I Savings Bonds Now Yielding 7.12%

#110

Post by loeg » Mon, Nov 01, 2021, 3:31 PM UTC

NationalPark wrote: post #35

CJefferson wrote: post #2

Does anyone want to explain why this is an interesting story?

People aren't reading the link and don't realize that it's 1. an I bond not a T bill and 2. Has a variable interest rate based on measured inflation that adjusts twice a year (the 7.12% in the title is the combined rate, so it can change during the term of the security).

In particular the fixed rate component is 0%. It will match inflation but not beat it.