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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%

#81

Post by mc32 »

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…

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 'devaluate' their currencies to make up the difference?

Re: US Series I Savings Bonds Now Yielding 7.12%

#82

Post by mudil »

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.

Re: US Series I Savings Bonds Now Yielding 7.12%

#83

Post by mhmmmmmm »

newacct583 wrote: post #72
anm89 wrote: post #28

7% is likely a negative real rate at the moment.

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…

This particular Bond yields current inflation levels:

"How is the interest rate of an I bond determined? The interest rate combines two separate rates:

A fixed rate of return, which remains the same throughout the life of the I bond.

A variable semiannual inflation rate based on changes in the Consumer Price Index for all Urban Consumers (CPI-U). The Bureau of the Fiscal Service announces the rates each May and November. The semiannual inflation rate announced in May is the change between the CPI-U figures from the preceding September and March; the inflation rate announced in November is the change between the CPI-U figures from the preceding March and September."

So its fairly safe to assume that current inflation levels are indeed 7%.

Re: US Series I Savings Bonds Now Yielding 7.12%

#84

Post by Spooky23 »

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…

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 be feasible to buy thousands of single family homes as investment property, for example.

Re: US Series I Savings Bonds Now Yielding 7.12%

#85

Post by sacred_numbers »

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 only risk is losing out on greater gains from investing in a higher yield asset. Keep in mind that the yield on these will probably drop in 6 months, since the dividend is adjusted semiannually. If inflation keeps going the dividend will stay high, but other assets will also appreciate due to inflation.

Re: US Series I Savings Bonds Now Yielding 7.12%

#86

Post by JumpCrisscross »

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…

> 7.12% rate consists of a 0.00% fixed rate and a 3.56% inflation rate.

For comparison, TIPS trade at a negative real yield [1].

[1] https://www.treasury.gov/resource-center/data-chart-center/i...

Re: US Series I Savings Bonds Now Yielding 7.12%

#87

Post by anm89 »

newacct583 wrote: post #72
anm89 wrote: post #28

7% is likely a negative real rate at the moment.

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...

Re: US Series I Savings Bonds Now Yielding 7.12%

#88

Post by iknowicouldturn »

AndrewUnmuted wrote: post #74
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 you mean, once the "inflation number" goes back to normal. Inflation (supply of money) has been high [0] for literally decades. It won't get lower for a long time. It may never EVER go "back to normal." Normal would put us in a very bad macroeconomic position relative to all other nations. Why would we, the purveyor of the Petrodollar, do that? [0] https://fred.stlouisfed.org/…

Interesting. Are the inflation rate and inflation not causal with one another? I feel a bit ignorant now having always assumed they are essentially the same thing. Amount of new money printed.

Re: US Series I Savings Bonds Now Yielding 7.12%

#89

Post by mhb »

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.

No risk other than situations in which there will be much bigger problems. They can't lose money.
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