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US Series I Savings Bonds Now Yielding 7.12%

treasurydirect.gov

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Re: US Series I Savings Bonds Now Yielding 7.12%

#121

Post by anthony_r »

seniorThrowaway wrote: post #104

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…

FYI, normal TIPS have the fixed rate well below zero (which makes the total yield add up to close to where the fixed rates bonds trade at, around 1-2%). These retail instruments are kind of no brainers if their fixed rate is artificially not allowed to drop below zero.

Re: US Series I Savings Bonds Now Yielding 7.12%

#122

Post by jacquesm »

anm89 wrote: post #87
newacct583 wrote: post #72

Earlier quoted context omitted.

Cite for that? No one with any expertise has predicted a >7% inflation level that I'm aware of. This sounds like something you got from talk radio. (Edit: two replies have taken this out of context. Savings bonds have a minimum term of five years (well, without penalty). For them to have a negative yield, we need to see aggregate inflation >7.12% over the next five years. That's nuts, sorry. No one is predicting that…

Telling that your comment is starting to gray out but I have a degree in economics and I don't listen to talk radio Housing inflation has averaged 14% to start. https://www.reuters.com/world/us/runaway-us-home-price-rises...

And that being an average: it is much worse in some places, here in NL it's 20%, and there are countries where it is even worse.

Re: US Series I Savings Bonds Now Yielding 7.12%

#123

Post by newacct583 »

mc32 wrote: post #98
Spooky23 wrote: post #84

Earlier quoted context omitted.

Exactly. As a well to do tech person, the impact of 10% inflation is nil when my retirement funds returned 25%. Now if I was some über rich dude with millions of capital tied up high friction investments, forced to choose between paying capital gains taxes or losing to inflation, i may feel differently. Frankly, we need to put shitty businesses that exist by virtue of low interest rates out of business. It should not…

It's the poor who this hits most. Most tech workers can 'absorb' this. We may get raises, bonuses, etc., to make up the diff. But your average Joe and Jill in the world working restaurants or deliveries, they can't just shrug it off.

That's almost exactly backwards, where are you getting this? The big inflation driver right now is (1) the increase in liquid cash in the economy due to covid relief programs and (2) the higher wage levels needed to get people to work during a pandemic.

The "poor" are, in fact, doing significantly better (economically, anyway) now than they were in 2019. I'll have to go look it up, but there was a great blog post a few months back looking at poverty statistics over the pandemic. The relief bills helped a ton.

Re: US Series I Savings Bonds Now Yielding 7.12%

#124

Post by itake »

seniorThrowaway wrote: post #104

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…

With todays market, or even yesterdays, taking 20 years to double in value seems low IMHO.

At 5% interest, it takes 14 years to double. At 10%, 7.2 years.

Re: US Series I Savings Bonds Now Yielding 7.12%

#125

Post by mikeiz404 »

For reference: - I-Bonds base inflation off the CPI-U index

- CPI-U for 2020-2021 is around 5.4% and this table breaks down the different areas it measures: https://www.bls.gov/news.release/cpi.t01.htm

- And some info on the CPI-U: https://www.investopedia.com/terms/c/cpiu.asp

From looking at the 2020 - 2021 breakdown, and if I am interpreting this correctly, the biggest single category change is in energy at almost 25% with a contribution of ~1.81% to the index.

Re: US Series I Savings Bonds Now Yielding 7.12%

#126

Post by jonathankoren »

mc32 wrote: post #113
jonathankoren wrote: post #102

Earlier quoted context omitted.

> 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.

Hyperinflation is Zimbabwe or Brazil during some periods. That's not what I'm comparing it to. High inflation is what we had during the Carter years. People who lived though it say it was awful. Five per-cent may be on the cusp, but 8% is getting up there where it eats up a wage earner's buying power.

If you’re not comparing the United States in 2021 to countries where the entire economy has collapsed due to inflation, then why are you using terms like “banana republic”? You could have used the 1970s if you meant the the 1970s, which as someone that barely remembers it, was not a “banana republic”.

Re: US Series I Savings Bonds Now Yielding 7.12%

#127

Post by jacquesm »

latchkey wrote: post #12

I have an Ally bank account. Over the past couple years, they've been great about religiously informing me of my interest rates dropping to almost zero. I see something like this and just have to laugh. When will I get my increase notification?

Lucky you, mine are < 0. (-.5 % to be precise). That doesn't stop the government here from calculating your taxes based on an imaginary 4.5% gain.

Re: US Series I Savings Bonds Now Yielding 7.12%

#128

Post by pvitz »

cornstalks wrote: post #107
rashkov wrote: post #80

Earlier quoted context omitted.

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 pr…

> But earning 2x inflation rate is pretty decent for a low-risk investment.

Maybe you mean this anyway, but your statement could be misunderstood: One doesn't earn twice the inflation rate. It is multiplied by two to give an annual rate that can then be combined with the annual fixed rate. When calculating the coupon, you would of course have to adjust for half a year.

Re: US Series I Savings Bonds Now Yielding 7.12%

#129

Post by jacquesm »

skinnymuch wrote: post #45

The fixed rate is 0% as has been the case. The inflation yield rate has been bouncy. This doesn’t seem as good as the title and comments are making it seem unless things stay this way. Table near bottom of page shows the inflation rate over time. Edit: I agree this could be a sign of something long term Edit: recent history of rates -- Inflation rates -- Nov 2021 3.56% May 2021 1.77% Nov 2020 0.84% May 2020 0.53% Nov…

There is nothing in that formula that stops it from going below zero. You are making assumptions about the inputs.

Re: US Series I Savings Bonds Now Yielding 7.12%

#130

Post by timr »

cornstalks wrote: post #107
rashkov wrote: post #80

Earlier quoted context omitted.

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 pr…

These are a good place to store your emergency fund (assuming you roll your money into them 10k at a time, so that you have short-term liquidity when needed.)
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