I Bonds Mega Thread (I Bond Heads Rejoice!)

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
maywood
Posts: 307
Joined: Tue Jun 19, 2007 9:52 pm

Re: I Bonds variable rate @ 3.54% in May

Post by maywood »

Thesaints wrote: Sat Sep 18, 2021 2:56 pm
maywood wrote: Sat Sep 18, 2021 5:10 am I'm getting a 3.28 difference between the Aug and March CPI-U, so that's 6.56% with one month to go. (The rate will be determined by the difference in Sep from March CPI-U).

The highest 6 month inflation rate in the past was 2.85 in Nov 2005 (or 5.7% annualized)
The key is "is on track". Your estimates assumes that on the sixth and final month the CPI does not change. Mine assumes that it changes following the previous 5 months trend.
I'm not assuming it won't change in September, what I was trying to say is that it will be 3.28 plus whatever the September change is. The rate of change seems to have slowed down, but that doesn't necessarily predict what the September change will be. The point change in the CPI-U (not percentage) was over 2 for each of April, May, and June. In July it was about 1.3 and in August only .56.

maywood
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

maywood wrote: Sat Sep 18, 2021 3:17 pm
Thesaints wrote: Sat Sep 18, 2021 2:56 pm
maywood wrote: Sat Sep 18, 2021 5:10 am I'm getting a 3.28 difference between the Aug and March CPI-U, so that's 6.56% with one month to go. (The rate will be determined by the difference in Sep from March CPI-U).

The highest 6 month inflation rate in the past was 2.85 in Nov 2005 (or 5.7% annualized)
The key is "is on track". Your estimates assumes that on the sixth and final month the CPI does not change. Mine assumes that it changes following the previous 5 months trend.
I'm not assuming it won't change in September, what I was trying to say is that it will be 3.28 plus whatever the September change is. The rate of change seems to have slowed down, but that doesn't necessarily predict what the September change will be. The point change in the CPI-U (not percentage) was over 2 for each of April, May, and June. In July it was about 1.3 and in August only .56.

maywood
If there is 0 change in September, then what would the likely variable rate end up being on November 1.
maywood
Posts: 307
Joined: Tue Jun 19, 2007 9:52 pm

Re: I Bonds variable rate @ 3.54% in May

Post by maywood »

anon_investor wrote: Sat Sep 18, 2021 3:24 pm
maywood wrote: Sat Sep 18, 2021 3:17 pm
Thesaints wrote: Sat Sep 18, 2021 2:56 pm
maywood wrote: Sat Sep 18, 2021 5:10 am I'm getting a 3.28 difference between the Aug and March CPI-U, so that's 6.56% with one month to go. (The rate will be determined by the difference in Sep from March CPI-U).

The highest 6 month inflation rate in the past was 2.85 in Nov 2005 (or 5.7% annualized)
The key is "is on track". Your estimates assumes that on the sixth and final month the CPI does not change. Mine assumes that it changes following the previous 5 months trend.
I'm not assuming it won't change in September, what I was trying to say is that it will be 3.28 plus whatever the September change is. The rate of change seems to have slowed down, but that doesn't necessarily predict what the September change will be. The point change in the CPI-U (not percentage) was over 2 for each of April, May, and June. In July it was about 1.3 and in August only .56.

maywood
If there is 0 change in September, then what would the likely variable rate end up being on November 1.
If there is no change to the CPI-U in September, the November 1 "6 month inflation rate" would be about 3.28, which is 6.56% annually.

maywood
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

maywood wrote: Sat Sep 18, 2021 3:42 pm
anon_investor wrote: Sat Sep 18, 2021 3:24 pm
maywood wrote: Sat Sep 18, 2021 3:17 pm
Thesaints wrote: Sat Sep 18, 2021 2:56 pm
maywood wrote: Sat Sep 18, 2021 5:10 am I'm getting a 3.28 difference between the Aug and March CPI-U, so that's 6.56% with one month to go. (The rate will be determined by the difference in Sep from March CPI-U).

The highest 6 month inflation rate in the past was 2.85 in Nov 2005 (or 5.7% annualized)
The key is "is on track". Your estimates assumes that on the sixth and final month the CPI does not change. Mine assumes that it changes following the previous 5 months trend.
I'm not assuming it won't change in September, what I was trying to say is that it will be 3.28 plus whatever the September change is. The rate of change seems to have slowed down, but that doesn't necessarily predict what the September change will be. The point change in the CPI-U (not percentage) was over 2 for each of April, May, and June. In July it was about 1.3 and in August only .56.

maywood
If there is 0 change in September, then what would the likely variable rate end up being on November 1.
If there is no change to the CPI-U in September, the November 1 "6 month inflation rate" would be about 3.28, which is 6.56% annually.

maywood
Still very high.
User avatar
fishandgolf
Posts: 794
Joined: Fri Nov 25, 2016 1:50 pm

Re: I Bonds variable rate @ 3.54% in May

Post by fishandgolf »

Thank you Bogleheads for your replies.....so very much appreciated.

I will be purchasing more I Bonds shortly! :sharebeer
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

fishandgolf wrote: Sat Sep 18, 2021 4:35 pm Thank you Bogleheads for your replies.....so very much appreciated.

I will be purchasing more I Bonds shortly! :sharebeer
They are great, I wish I had bought in 2018, when they still had a 0.5% fixed rate.
User avatar
ApeAttack
Posts: 915
Joined: Wed Dec 23, 2020 7:28 pm
Location: Gorillatown, USA

Re: I Bonds variable rate @ 3.54% in May

Post by ApeAttack »

fishandgolf wrote: Sat Sep 18, 2021 4:35 pm Thank you Bogleheads for your replies.....so very much appreciated.

I will be purchasing more I Bonds shortly! :sharebeer
Welcome to the club. You'll have to wait one year to learn the secret handshake though.
May all your index funds gain +0.5% today.
Thesaints
Posts: 5108
Joined: Tue Jun 20, 2017 12:25 am

Re: I Bonds variable rate @ 3.54% in May

Post by Thesaints »

maywood wrote: Sat Sep 18, 2021 3:17 pm I'm not assuming it won't change in September, what I was trying to say is that it will be 3.28 plus whatever the September change is.
We are saying the same thing: if there is no change in September it will be 6.56% annualized. If there is a change in September equal to the average change in the past 5 months, it will be 8% and change.

“Assuming” does not mean that you expect, but simply “in the hypothesis”
User avatar
fishandgolf
Posts: 794
Joined: Fri Nov 25, 2016 1:50 pm

Re: I Bonds variable rate @ 3.54% in May

Post by fishandgolf »

ApeAttack wrote: Sat Sep 18, 2021 5:40 pm
fishandgolf wrote: Sat Sep 18, 2021 4:35 pm Thank you Bogleheads for your replies.....so very much appreciated.

I will be purchasing more I Bonds shortly! :sharebeer
Welcome to the club. You'll have to wait one year to learn the secret handshake though.
I'll check out the Boglehead's index page to see if I can put my finger on it.............I'll let ya know if I don't find it!

Cheers! :sharebeer
calwatch
Posts: 1447
Joined: Wed Oct 02, 2013 1:48 am

Re: I Bonds variable rate @ 3.54% in May

Post by calwatch »

Da5id wrote: Sat Sep 18, 2021 9:46 am
fishandgolf wrote: Sat Sep 18, 2021 8:38 am 2) If there is a "hot" run on I Bonds, is there a chance the Treasury will shut down the purchase of I Bonds at some point?
I Bonds are a pretty niche product. There is no benefit to investment professionals advocating for them (they don't get a cut) so those with advisors or who listen to talking heads probably don't partake. I gather that most people haven't heard of them. So I doubt they will go on a really "hot run" of sales.

That said, I'm not sure why Treasury still sells I-bonds. Seems like they are not a great deal for the gov't in general. So if they stopped those sales I'd not be shocked. I did a quick google to see how much the gov't sells annually in I-bonds and ee-bonds and didn't see the answer, but that might just be a weak google game on my part as the answer must surely be out there.
Thought this article was interesting, which also links to the answer to your question.
https://www.freep.com/story/money/perso ... 727904002/

In May, savers bought 26,432 Series I Bonds valued at nearly $127.6 million. That is nearly five times as many bonds bought in May 2020 and almost 10 times the dollars invested at that same time a year ago, according to Fiscal Data numbers reported online by the Bureau of the Fiscal Service, which is part of the U.S. Treasury Department.

In May 2020, savers bought 5,610 in I Bonds valued at nearly $13.4 million.


[...]

Savers actually cashed out more savings bonds than they bought in May.

According to the Fiscal Data numbers, savers redeemed 90,260 Series I Bonds in May 2021 — cashing out nearly $167.8 million.

From January through April, savers redeemed more than $701 million in I Bonds this year.

There could be a long list of reasons why some people want their money now.

Some might have bought those bonds 20 years ago and figure it's OK to live a little now. Or they're trying to help their children get through college.

Some could need the money now to pay bills after retiring earlier than expected or losing a job.

Some families may have faced the death of a loved one and decided to cash the bonds.

But [Savings Bond Informer Dan] Pederson is concerned that there could be another reason: Some people clearly do not understand the I Bonds that they have or how these bonds work.


This is the data set, BTW: https://fiscaldata.treasury.gov/dataset ... securities
Whakamole
Posts: 1765
Joined: Wed Jan 13, 2016 8:59 pm

Re: I Bonds variable rate @ 3.54% in May

Post by Whakamole »

Thesaints wrote: Sat Sep 18, 2021 6:03 pm
maywood wrote: Sat Sep 18, 2021 3:17 pm I'm not assuming it won't change in September, what I was trying to say is that it will be 3.28 plus whatever the September change is.
We are saying the same thing: if there is no change in September it will be 6.56% annualized. If there is a change in September equal to the average change in the past 5 months, it will be 8% and change.

“Assuming” does not mean that you expect, but simply “in the hypothesis”
If it's 8%, I'm making a second trust and buying another $10k.
Thesaints
Posts: 5108
Joined: Tue Jun 20, 2017 12:25 am

Re: I Bonds variable rate @ 3.54% in May

Post by Thesaints »

Whakamole wrote: Wed Sep 22, 2021 1:05 am
Thesaints wrote: Sat Sep 18, 2021 6:03 pm
maywood wrote: Sat Sep 18, 2021 3:17 pm I'm not assuming it won't change in September, what I was trying to say is that it will be 3.28 plus whatever the September change is.
We are saying the same thing: if there is no change in September it will be 6.56% annualized. If there is a change in September equal to the average change in the past 5 months, it will be 8% and change.

“Assuming” does not mean that you expect, but simply “in the hypothesis”
If it's 8%, I'm making a second trust and buying another $10k.
8% on an annual basis and it lasts only 6 months. Not really something to get very excited about.
maywood
Posts: 307
Joined: Tue Jun 19, 2007 9:52 pm

Re: I Bonds variable rate @ 3.54% in May

Post by maywood »

calwatch, thanks for posting that article about I bonds. I hadn't seen it, and found it interesting. I have Dan Peterson's book from 20 years ago.

maywood
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

Re: I Bonds variable rate @ 3.54% in May

Post by Da5id »

calwatch wrote: Wed Sep 22, 2021 12:33 am
Da5id wrote: Sat Sep 18, 2021 9:46 am
fishandgolf wrote: Sat Sep 18, 2021 8:38 am 2) If there is a "hot" run on I Bonds, is there a chance the Treasury will shut down the purchase of I Bonds at some point?
I Bonds are a pretty niche product. There is no benefit to investment professionals advocating for them (they don't get a cut) so those with advisors or who listen to talking heads probably don't partake. I gather that most people haven't heard of them. So I doubt they will go on a really "hot run" of sales.

That said, I'm not sure why Treasury still sells I-bonds. Seems like they are not a great deal for the gov't in general. So if they stopped those sales I'd not be shocked. I did a quick google to see how much the gov't sells annually in I-bonds and ee-bonds and didn't see the answer, but that might just be a weak google game on my part as the answer must surely be out there.
Thought this article was interesting, which also links to the answer to your question.
https://www.freep.com/story/money/perso ... 727904002/

In May, savers bought 26,432 Series I Bonds valued at nearly $127.6 million. That is nearly five times as many bonds bought in May 2020 and almost 10 times the dollars invested at that same time a year ago, according to Fiscal Data numbers reported online by the Bureau of the Fiscal Service, which is part of the U.S. Treasury Department.

In May 2020, savers bought 5,610 in I Bonds valued at nearly $13.4 million.


[...]

Savers actually cashed out more savings bonds than they bought in May.

According to the Fiscal Data numbers, savers redeemed 90,260 Series I Bonds in May 2021 — cashing out nearly $167.8 million.

From January through April, savers redeemed more than $701 million in I Bonds this year.

There could be a long list of reasons why some people want their money now.

Some might have bought those bonds 20 years ago and figure it's OK to live a little now. Or they're trying to help their children get through college.

Some could need the money now to pay bills after retiring earlier than expected or losing a job.

Some families may have faced the death of a loved one and decided to cash the bonds.

But [Savings Bond Informer Dan] Pederson is concerned that there could be another reason: Some people clearly do not understand the I Bonds that they have or how these bonds work.


This is the data set, BTW: https://fiscaldata.treasury.gov/dataset ... securities
So from that source $1.27B I-bonds were sold in past 12 months. Series EE bond sales were much smaller, $105M sold in past 12 months.

Seems like small potatoes. Back to the question of whether they will keep the program or not, I guess it depends on how much it costs them to operate. But it barely moves the needle on total government debt.
FinancialDave
Posts: 1819
Joined: Thu May 26, 2011 9:36 pm

Re: I Bonds variable rate @ 3.54% in May

Post by FinancialDave »

I have read this wiki article on I-bond math however it doesn't explain the compounding too well:

https://www.bogleheads.org/wiki/I_savings_bonds

The issue is in Dec 2020 I bought a $6000 I-bond. That rate was 1.68% annualized. The first 6 months total showed as $6050.40. $50.40 interest, exactly what I would expect.

Now the next 6 month period is @ 3.54 annualized. If that math is applied to the original $6000 the interest would be $17.70 per month or $106.20 for the 6 months. However, my account shows the interest for last month was only $16.80.

What is going on here? I would think the 1.77% would be compounded on the semiannual update of $6050.40 and actually be $17.85. Can't reconcile the $16.80 number??

Dave
I love simulated data. It turns the impossible into the possible!
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

FinancialDave wrote: Mon Oct 11, 2021 3:41 pm I have read this wiki article on I-bond math however it doesn't explain the compounding too well:

https://www.bogleheads.org/wiki/I_savings_bonds

The issue is in Dec 2020 I bought a $6000 I-bond. That rate was 1.68% annualized. The first 6 months total showed as $6050.40. $50.40 interest, exactly what I would expect.

Now the next 6 month period is @ 3.54 annualized. If that math is applied to the original $6000 the interest would be $17.70 per month or $106.20 for the 6 months. However, my account shows the interest for last month was only $16.80.

What is going on here? I would think the 1.77% would be compounded on the semiannual update of $6050.40 and actually be $17.85. Can't reconcile the $16.80 number??

Dave
Maybe it has something to do with TD hiding the last 3 months of interest due to the early withdrawal penalty if redeemed before 5 years, this "missing interest" will reappear in your TD account after the I Bonds have been held for 5 years.
Thesaints
Posts: 5108
Joined: Tue Jun 20, 2017 12:25 am

Re: I Bonds variable rate @ 3.54% in May

Post by Thesaints »

Da5id wrote: Wed Sep 22, 2021 12:31 pm Seems like small potatoes. Back to the question of whether they will keep the program or not, I guess it depends on how much it costs them to operate. But it barely moves the needle on total government debt.
It is a program for small individual savers, not for supplementing the public debt
MrJedi
Posts: 3540
Joined: Wed May 06, 2020 11:42 am

Re: I Bonds variable rate @ 3.54% in May

Post by MrJedi »

FinancialDave wrote: Mon Oct 11, 2021 3:41 pm I have read this wiki article on I-bond math however it doesn't explain the compounding too well:

https://www.bogleheads.org/wiki/I_savings_bonds

The issue is in Dec 2020 I bought a $6000 I-bond. That rate was 1.68% annualized. The first 6 months total showed as $6050.40. $50.40 interest, exactly what I would expect.

Now the next 6 month period is @ 3.54 annualized. If that math is applied to the original $6000 the interest would be $17.70 per month or $106.20 for the 6 months. However, my account shows the interest for last month was only $16.80.

What is going on here? I would think the 1.77% would be compounded on the semiannual update of $6050.40 and actually be $17.85. Can't reconcile the $16.80 number??

Dave
Subtract 3 months interest for the early redemption penalty.

In fact, IIRC you will not see any interest show up in the first 3 months of the bond.
User avatar
bligh
Posts: 1533
Joined: Wed Jul 27, 2016 9:13 pm

Re: I Bonds variable rate @ 3.54% in May

Post by bligh »

Does anyone know when the November Rate will be announced? It should be coming out soon I would imagine.
BrokerageZelda
Posts: 463
Joined: Sat Apr 10, 2021 10:39 am

Re: I Bonds variable rate @ 3.54% in May

Post by BrokerageZelda »

FinancialDave wrote: Mon Oct 11, 2021 3:41 pm I have read this wiki article on I-bond math however it doesn't explain the compounding too well:

https://www.bogleheads.org/wiki/I_savings_bonds

The issue is in Dec 2020 I bought a $6000 I-bond. That rate was 1.68% annualized. The first 6 months total showed as $6050.40. $50.40 interest, exactly what I would expect.

Now the next 6 month period is @ 3.54 annualized. If that math is applied to the original $6000 the interest would be $17.70 per month or $106.20 for the 6 months. However, my account shows the interest for last month was only $16.80.

What is going on here? I would think the 1.77% would be compounded on the semiannual update of $6050.40 and actually be $17.85. Can't reconcile the $16.80 number??

Dave
Interest payments are based on the base value of a $25 bond, rounded to the nearest cent. This causes bonds of larger denominations to show extreme upward and downward 'errors' from what would seem to be the correct amount of interest month to month.

In your case, a $6000 I Bond would multiply the 1-cent rounding of the base value by 240 times ($25 x 240 = $6000). This means that your interest payments will be rounded to the nearest $2.40.

Because $17.85 is closer to $16.80 (7 x $2.40) than to $19.20 (8 x $2.40), you are credited with $16.80 for that month. If the 'real value' of the bond is closer to a higher step later on, you will receive more interest than you 'deserve' at that time.
Whakamole
Posts: 1765
Joined: Wed Jan 13, 2016 8:59 pm

Re: I Bonds variable rate @ 3.54% in May

Post by Whakamole »

bligh wrote: Mon Oct 11, 2021 4:17 pm Does anyone know when the November Rate will be announced? It should be coming out soon I would imagine.
The May-October rate came out May 3rd (the first business day), so November 1st?

Hopefully it will be high based on inflation (though I'd prefer low inflation!)
FinancialDave
Posts: 1819
Joined: Thu May 26, 2011 9:36 pm

Re: I Bonds variable rate @ 3.54% in May

Post by FinancialDave »

MrJedi wrote: Mon Oct 11, 2021 4:15 pm
FinancialDave wrote: Mon Oct 11, 2021 3:41 pm I have read this wiki article on I-bond math however it doesn't explain the compounding too well:

https://www.bogleheads.org/wiki/I_savings_bonds

The issue is in Dec 2020 I bought a $6000 I-bond. That rate was 1.68% annualized. The first 6 months total showed as $6050.40. $50.40 interest, exactly what I would expect.

Now the next 6 month period is @ 3.54 annualized. If that math is applied to the original $6000 the interest would be $17.70 per month or $106.20 for the 6 months. However, my account shows the interest for last month was only $16.80.

What is going on here? I would think the 1.77% would be compounded on the semiannual update of $6050.40 and actually be $17.85. Can't reconcile the $16.80 number??

Dave
Subtract 3 months interest for the early redemption penalty.

In fact, IIRC you will not see any interest show up in the first 3 months of the bond.
These numbers all factor in that the 3 month penalty doesn't show up on the TD report.

Remember this is a Dec bond - 6 months of interest shows up in Sept which is really month Jun for the bond!
I love simulated data. It turns the impossible into the possible!
FinancialDave
Posts: 1819
Joined: Thu May 26, 2011 9:36 pm

Re: I Bonds variable rate @ 3.54% in May

Post by FinancialDave »

BrokerageZelda wrote: Mon Oct 11, 2021 4:20 pm
FinancialDave wrote: Mon Oct 11, 2021 3:41 pm I have read this wiki article on I-bond math however it doesn't explain the compounding too well:

https://www.bogleheads.org/wiki/I_savings_bonds

The issue is in Dec 2020 I bought a $6000 I-bond. That rate was 1.68% annualized. The first 6 months total showed as $6050.40. $50.40 interest, exactly what I would expect.

Now the next 6 month period is @ 3.54 annualized. If that math is applied to the original $6000 the interest would be $17.70 per month or $106.20 for the 6 months. However, my account shows the interest for last month was only $16.80.

What is going on here? I would think the 1.77% would be compounded on the semiannual update of $6050.40 and actually be $17.85. Can't reconcile the $16.80 number??

Dave
Interest payments are based on the base value of a $25 bond, rounded to the nearest cent. This causes bonds of larger denominations to show extreme upward and downward 'errors' from what would seem to be the correct amount of interest month to month.

In your case, a $6000 I Bond would multiply the 1-cent rounding of the base value by 240 times ($25 x 240 = $6000). This means that your interest payments will be rounded to the nearest $2.40.

Because $17.85 is closer to $16.80 (7 x $2.40) than to $19.20 (8 x $2.40), you are credited with $16.80 for that month. If the 'real value' of the bond is closer to a higher step later on, you will receive more interest than you 'deserve' at that time.
I understand the $25 idea, but not the compounding you suggest.

The I-bonds are not exactly a typical bond, but a normal bond would pay equal interest payments at the coupon rate for 6-months.

In this case I see the coupon rate for the period in question as 1.77% which on a $25 bond is .4425 or 44 cents for the period. Multiply this by 240 and you get $105.60 or $17.60 per month on $6000. no?

The second question is - isn't the second 6 month period multiplier really 6050.40/25 or 243.016 since the bonds are suppose to be compounded semi-annually.
I love simulated data. It turns the impossible into the possible!
Whakamole
Posts: 1765
Joined: Wed Jan 13, 2016 8:59 pm

Re: I Bonds variable rate @ 3.54% in May

Post by Whakamole »

https://tipswatch.com/2021/10/06/coming ... -a-decade/

We should get an idea of the new rate on Wednesday. Tips Watch is estimating 6.5%-7%.
BrokerageZelda
Posts: 463
Joined: Sat Apr 10, 2021 10:39 am

Re: I Bonds variable rate @ 3.54% in May

Post by BrokerageZelda »

FinancialDave wrote: Mon Oct 11, 2021 4:43 pm
BrokerageZelda wrote: Mon Oct 11, 2021 4:20 pm
FinancialDave wrote: Mon Oct 11, 2021 3:41 pm I have read this wiki article on I-bond math however it doesn't explain the compounding too well:

https://www.bogleheads.org/wiki/I_savings_bonds

The issue is in Dec 2020 I bought a $6000 I-bond. That rate was 1.68% annualized. The first 6 months total showed as $6050.40. $50.40 interest, exactly what I would expect.

Now the next 6 month period is @ 3.54 annualized. If that math is applied to the original $6000 the interest would be $17.70 per month or $106.20 for the 6 months. However, my account shows the interest for last month was only $16.80.

What is going on here? I would think the 1.77% would be compounded on the semiannual update of $6050.40 and actually be $17.85. Can't reconcile the $16.80 number??

Dave
Interest payments are based on the base value of a $25 bond, rounded to the nearest cent. This causes bonds of larger denominations to show extreme upward and downward 'errors' from what would seem to be the correct amount of interest month to month.

In your case, a $6000 I Bond would multiply the 1-cent rounding of the base value by 240 times ($25 x 240 = $6000). This means that your interest payments will be rounded to the nearest $2.40.

Because $17.85 is closer to $16.80 (7 x $2.40) than to $19.20 (8 x $2.40), you are credited with $16.80 for that month. If the 'real value' of the bond is closer to a higher step later on, you will receive more interest than you 'deserve' at that time.
I understand the $25 idea, but not the compounding you suggest.

The I-bonds are not exactly a typical bond, but a normal bond would pay equal interest payments at the coupon rate for 6-months.

In this case I see the coupon rate for the period in question as 1.77% which on a $25 bond is .4425 or 44 cents for the period. Multiply this by 240 and you get $105.60 or $17.60 per month on $6000. no?

The second question is - isn't the second 6 month period multiplier really 6050.40/25 or 243.016 since the bonds are suppose to be compounded semi-annually.
The rounding only happens at the last step when figuring out the new price of the bond - the .4425 you mention is the true multiplier used at the base $25 level for the entire six-month period.

The original face value of the bond determines the 'resolution' at which the bond's posted price is resolved, not the 'resolution' at which the interest payment and 'true decimal underlying value' of the bond is calculated - thus, the step is always exactly $2.40 for a $6000 original face value bond, even after compounding. Eventually, you will get an interest payment that takes you over the 'true value' as determined by the multiplier for the same reasons.
Thesaints
Posts: 5108
Joined: Tue Jun 20, 2017 12:25 am

Re: I Bonds variable rate @ 3.54% in May

Post by Thesaints »

FinancialDave wrote: Mon Oct 11, 2021 4:43 pm The second question is - isn't the second 6 month period multiplier really 6050.40/25 or 243.016 since the bonds are suppose to be compounded semi-annually.
I think interest on savings bonds is compounded monthly.
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

Whakamole wrote: Mon Oct 11, 2021 4:56 pm https://tipswatch.com/2021/10/06/coming ... -a-decade/

We should get an idea of the new rate on Wednesday. Tips Watch is estimating 6.5%-7%.
That is Incredible!
MrJedi
Posts: 3540
Joined: Wed May 06, 2020 11:42 am

Re: I Bonds variable rate @ 3.54% in May

Post by MrJedi »

bligh wrote: Mon Oct 11, 2021 4:17 pm Does anyone know when the November Rate will be announced? It should be coming out soon I would imagine.
The rates are not officially announced until November. However the September CPI-U will be released on October 13. After that number is released, then all of the data is available to make an unofficial calculation of the inflation/variable rate.
User avatar
bligh
Posts: 1533
Joined: Wed Jul 27, 2016 9:13 pm

Re: I Bonds variable rate @ 3.54% in May

Post by bligh »

MrJedi wrote: Mon Oct 11, 2021 5:55 pm
bligh wrote: Mon Oct 11, 2021 4:17 pm Does anyone know when the November Rate will be announced? It should be coming out soon I would imagine.
The rates are not officially announced until November. However the September CPI-U will be released on October 13. After that number is released, then all of the data is available to make an unofficial calculation of the inflation/variable rate.
Perfect, thank you! That is exactly what I was thinking of. In the past, I had remembered seeing posts on this forum discussing the new rates with confidence before they had been officially announced.
FactualFran
Posts: 2777
Joined: Sat Feb 21, 2015 1:29 pm

Re: I Bonds variable rate @ 3.54% in May

Post by FactualFran »

FinancialDave wrote: Mon Oct 11, 2021 3:41 pm The issue is in Dec 2020 I bought a $6000 I-bond. That rate was 1.68% annualized. The first 6 months total showed as $6050.40. $50.40 interest, exactly what I would expect.

Now the next 6 month period is @ 3.54 annualized. If that math is applied to the original $6000 the interest would be $17.70 per month or $106.20 for the 6 months. However, my account shows the interest for last month was only $16.80.

What is going on here? I would think the 1.77% would be compounded on the semiannual update of $6050.40 and actually be $17.85. Can't reconcile the $16.80 number??
As others have posted, the redemption values are rounded to the nearest cent for a $25 bond. The redemption values for other denominations are multiples of that. For a $6,000 bond the multiplier is 240.

After 6 months at a composite rate of 1.68%, the redemption value, without the early redemption penalty, of a $25 bond is $25.21 (=round(25*(1+1.68%/2),2)); that multiplied by 240 is $6,050.40. After the next six month with a composite rate of 3.54%, it is $25.66 (=round(25.21*(1+3.54%/2),2)); that multiplied by 240 is $6,158.40.

The redemption value after month M of a six month earnings period is the redemption value at the start of the period times (1+(compositeRate/2)^(M/6)) with the redemption value rounded to the nearest cent each month.

After one month of the second six month period, the value of a bond issued for $25. is $25.28 (=round(25.21*(1+3.54%/2)^(1/6),2)), which in a increase of $0.07 from the previous month. The increase from the previous month of a bond issued for $6,000 is $16.80 (=0.07*240).

After two months of the second six month period, the value of a bond issued for $25 is $25.36 (=round(25.21*(1+3.54%/2)^(2/6),2)), which in a increase of $0.08 from the previous month. The increase from the previous month of a bond issued for $6,000 is $19.20 (=0.08*240).

During the months of the second six month period, the increase in value of a bond issued for $6,000 is $16.80 for some months and $19.20 for other months.
FinancialDave
Posts: 1819
Joined: Thu May 26, 2011 9:36 pm

Re: I Bonds variable rate @ 3.54% in May

Post by FinancialDave »

Thesaints wrote: Mon Oct 11, 2021 5:12 pm
FinancialDave wrote: Mon Oct 11, 2021 4:43 pm The second question is - isn't the second 6 month period multiplier really 6050.40/25 or 243.016 since the bonds are suppose to be compounded semi-annually.
I think interest on savings bonds is compounded monthly.
It can't be otherwise the correct answer for the first 6 months wouldn't be $50.40 of interest. 25 * (1.68/2)% = 25.21*240 = $6050.40

The website says it is compounded semi-annually.
I love simulated data. It turns the impossible into the possible!
FinancialDave
Posts: 1819
Joined: Thu May 26, 2011 9:36 pm

Re: I Bonds variable rate @ 3.54% in May

Post by FinancialDave »

FactualFran wrote: Mon Oct 11, 2021 6:50 pm
FinancialDave wrote: Mon Oct 11, 2021 3:41 pm The issue is in Dec 2020 I bought a $6000 I-bond. That rate was 1.68% annualized. The first 6 months total showed as $6050.40. $50.40 interest, exactly what I would expect.

Now the next 6 month period is @ 3.54 annualized. If that math is applied to the original $6000 the interest would be $17.70 per month or $106.20 for the 6 months. However, my account shows the interest for last month was only $16.80.

What is going on here? I would think the 1.77% would be compounded on the semiannual update of $6050.40 and actually be $17.85. Can't reconcile the $16.80 number??
As others have posted, the redemption values are rounded to the nearest cent for a $25 bond. The redemption values for other denominations are multiples of that. For a $6,000 bond the multiplier is 240.

After 6 months at a composite rate of 1.68%, the redemption value, without the early redemption penalty, of a $25 bond is $25.21 (=round(25*(1+1.68%/2),2)); that multiplied by 240 is $6,050.40. After the next six month with a composite rate of 3.54%, it is $25.66 (=round(25.21*(1+3.54%/2),2)); that multiplied by 240 is $6,158.40.

The redemption value after month M of a six month earnings period is the redemption value at the start of the period times (1+(compositeRate/2)^(M/6)) with the redemption value rounded to the nearest cent each month.

After one month of the second six month period, the value of a bond issued for $25. is $25.28 (=round(25.21*(1+3.54%/2)^(1/6),2)), which in a increase of $0.07 from the previous month. The increase from the previous month of a bond issued for $6,000 is $16.80 (=0.07*240).

After two months of the second six month period, the value of a bond issued for $25 is $25.36 (=round(25.21*(1+3.54%/2)^(2/6),2)), which in a increase of $0.08 from the previous month. The increase from the previous month of a bond issued for $6,000 is $19.20 (=0.08*240).

During the months of the second six month period, the increase in value of a bond issued for $6,000 is $16.80 for some months and $19.20 for other months.
Ok, thank you very much.

One last question can you give me the correct rounding formula for the six month CPI-U calculation. For instance, in May my formula got 3.53 and not 3.54%
I love simulated data. It turns the impossible into the possible!
MrJedi
Posts: 3540
Joined: Wed May 06, 2020 11:42 am

Re: I Bonds variable rate @ 3.54% in May

Post by MrJedi »

FinancialDave wrote: Mon Oct 11, 2021 8:07 pm Ok, thank you very much.

One last question can you give me the correct rounding formula for the six month CPI-U calculation. For instance, in May my formula got 3.53 and not 3.54%
This will need fact checking, but iirc the formula calculates a semiannual rate rounded to the hundredths. Then the published annualized rate is simply a doubling of that semiannual rate. That is why the annualized rate is always an even number in the hundredths place.
FactualFran
Posts: 2777
Joined: Sat Feb 21, 2015 1:29 pm

Re: I Bonds variable rate @ 3.54% in May

Post by FactualFran »

FinancialDave wrote: Mon Oct 11, 2021 8:07 pm One last question can you give me the correct rounding formula for the six month CPI-U calculation. For instance, in May my formula got 3.53 and not 3.54%
The percent difference between CPI-U values over a six month period is rounded to the nearest one-hundredth of one percent. The rate announced in May 2021 used the CPI-U for September 2020 of 260.280 and the CPI-U for March 2021 of 264.877. The percent difference rounded to the nearest one-hundredth of one percent was 1.77%. The annual inflation rate of I-Bonds is twice the semiannual rate.
User avatar
Mel Lindauer
Moderator
Posts: 35782
Joined: Mon Feb 19, 2007 7:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: I Bonds variable rate @ 3.54% in May

Post by Mel Lindauer »

noriskfinance wrote: Fri Apr 16, 2021 7:47 am I placed an order to purchase at the end of the month in treasury direct. No way to change that not to execute this month now is it? I can see the order in my history page but no way to cancel or edit it.
Why on earth would you want to cancel or change the order? Enjoy the 3.54% rate for six months and then you'll get the new high rate that's announced in Nov. for the next six months.
Best Regards - Mel | | Semper Fi
User avatar
Mel Lindauer
Moderator
Posts: 35782
Joined: Mon Feb 19, 2007 7:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: I Bonds variable rate @ 3.54% in May

Post by Mel Lindauer »

anon_investor wrote: Mon Oct 11, 2021 5:20 pm
Whakamole wrote: Mon Oct 11, 2021 4:56 pm https://tipswatch.com/2021/10/06/coming ... -a-decade/

We should get an idea of the new rate on Wednesday. Tips Watch is estimating 6.5%-7%.
That is Incredible!
Even for the 0% I Bonds, that rate will be nice for a risk-free Treasury issue. But then again, those who hold the older I Bonds with fixed rates that topped out as high as 3.6% will be getting around 10% or more. Not too shabby.
Best Regards - Mel | | Semper Fi
Thesaints
Posts: 5108
Joined: Tue Jun 20, 2017 12:25 am

Re: I Bonds variable rate @ 3.54% in May

Post by Thesaints »

FinancialDave wrote: Mon Oct 11, 2021 7:14 pm
Thesaints wrote: Mon Oct 11, 2021 5:12 pm
FinancialDave wrote: Mon Oct 11, 2021 4:43 pm The second question is - isn't the second 6 month period multiplier really 6050.40/25 or 243.016 since the bonds are suppose to be compounded semi-annually.
I think interest on savings bonds is compounded monthly.
It can't be otherwise the correct answer for the first 6 months wouldn't be $50.40 of interest. 25 * (1.68/2)% = 25.21*240 = $6050.40

The website says it is compounded semi-annually.
The website says interest rate is established semi-annually.
As the interest compounding is concerned, every month the running amount of the bond is multiplied by the 12th root of the annual rate in force.
i.e. interest is compounded monthly.
In order to be compounded semiannually you would have to see constant monthly accrual for every 6-month period, which you don't I think.
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

Thesaints wrote: Tue Oct 12, 2021 1:35 am
FinancialDave wrote: Mon Oct 11, 2021 7:14 pm
Thesaints wrote: Mon Oct 11, 2021 5:12 pm
FinancialDave wrote: Mon Oct 11, 2021 4:43 pm The second question is - isn't the second 6 month period multiplier really 6050.40/25 or 243.016 since the bonds are suppose to be compounded semi-annually.
I think interest on savings bonds is compounded monthly.
It can't be otherwise the correct answer for the first 6 months wouldn't be $50.40 of interest. 25 * (1.68/2)% = 25.21*240 = $6050.40

The website says it is compounded semi-annually.
The website says interest rate is established semi-annually.
As the interest compounding is concerned, every month the running amount of the bond is multiplied by the 12th root of the annual rate in force.
i.e. interest is compounded monthly.
In order to be compounded semiannually you would have to see constant monthly accrual for every 6-month period, which you don't I think.
The Treasury Direct website actually says in bold that the interest is compounded semiannually:
https://www.treasurydirect.gov/indiv/re ... .htm#irate
Interest is earned on the bond every month. The interest is compounded semiannually: twice a year, the interest the bond earned in the previous six months is added to the bond's principal value; then, interest for the next six months is calculated using this adjusted principal.
User avatar
#Cruncher
Posts: 3977
Joined: Fri May 14, 2010 2:33 am
Location: New York City
Contact:

Re: I Bonds variable rate @ 3.54% in May

Post by #Cruncher »

FinancialDave wrote: Mon Oct 11, 2021 3:41 pm I have read this wiki article on I-bond math however it doesn't explain the compounding too well:
https://www.bogleheads.org/wiki/I_savings_bonds
The issue is in Dec 2020 I bought a $6000 I-bond. ... The first 6 months total showed as $6050.40. $50.40 interest, exactly what I would expect. Now the next 6 month period is @ 3.54 annualized. If that math is applied to the original $6000 the interest would be $17.70 per month or $106.20 for the 6 months. However, my account shows the interest for last month was only $16.80. ...
You're right about the Wiki article, Dave. The section, How interest is calculated, doesn't explain what happens the second 6-month period. As FactualFran says in his excellent explanation, the 6-month rounded [1] value of the base $25 bond, $25.21, is used as the base for the next six months. Here's the month-by-month calculation in tabular form. [2]

Code: Select all

  Month    Rate     Value                               Rounded    X 240    Intrst

Code: Select all

Dec 2020           25.0000                                25.00   6,000.00
Jan 2021   1.68%   25.0349  = 25.00 * 1.0084 ^ (1 / 6)    25.03   6,007.20    7.20
Feb 2021   1.68%   25.0698  = 25.00 * 1.0084 ^ (2 / 6)    25.07   6,016.80    9.60
Mar 2021   1.68%   25.1048  = 25.00 * 1.0084 ^ (3 / 6)    25.10   6,024.00    7.20
Apr 2021   1.68%   25.1398  = 25.00 * 1.0084 ^ (4 / 6)    25.14   6,033.60    9.60
May 2021   1.68%   25.1749  = 25.00 * 1.0084 ^ (5 / 6)    25.17   6,040.80    7.20
Jun 2021   1.68%   25.2100  = 25.00 * 1.0084 ^ (6 / 6)    25.21   6,050.40    9.60

Jul 2021   3.54%   25.2838  = 25.21 * 1.0177 ^ (1 / 6)    25.28   6,067.20   16.80
Aug 2021   3.54%   25.3579  = 25.21 * 1.0177 ^ (2 / 6)    25.36   6,086.40   19.20
Sep 2021   3.54%   25.4321  = 25.21 * 1.0177 ^ (3 / 6)    25.43   6,103.20   16.80
Oct 2021   3.54%   25.5066  = 25.21 * 1.0177 ^ (4 / 6)    25.51   6,122.40   19.20
Nov 2021   3.54%   25.5813  = 25.21 * 1.0177 ^ (5 / 6)    25.58   6,139.20   16.80
Dec 2021   3.54%   25.6562  = 25.21 * 1.0177 ^ (6 / 6)    25.66   6,158.40   19.20
                                                                            ------
1st 6 mo                                                                     50.40 
2nd 6 mo                                                                    108.00

Thesaints wrote: Tue Oct 12, 2021 1:35 amAs the interest compounding is concerned, every month the running amount of the bond is multiplied by the 12th root of the annual rate in force.
No, each month's value is based on the 6th root of half the annual rate. This is not the same as the 12th root of the annual rate. When rounded, the latter would give the wrong result for the second 6-month period shown above.

Code: Select all

Monthly rate
  0.290319% = (1 + 0.0354)     ^ (1 / 12) - 1 : 12th root of annual rate
  0.292848% = (1 + 0.0354 / 2) ^ (1 / 6)  - 1 :  6th root of half annual rate
Month 1
  25.2832 = 25.21 * (1 + 0.00290319)     : incorrect
  25.2838 = 25.21 * (1 + 0.00292848)     : correct
Month 6
  25.6523 = 25.21 * (1 + 0.00290319) ^ 6 : incorrect, rounds to 25.65
  25.6562 = 25.21 * (1 + 0.00292848) ^ 6 : correct, rounds to 25.66
  1. It so happens that with a 1.68% annual rate, the value after six months is exactly 25.21 (25 * 1.0084). Usually this isn't the case and the value will be rounded up or down a little to the nearest penny to serve as the base for the next six month period.
  2. You can also see the twelve monthly values for a $25 December 2020 I Bond on this web page.
stay_the_course
Posts: 71
Joined: Tue Dec 15, 2020 10:13 pm

Re: I Bonds variable rate @ 3.54% in May

Post by stay_the_course »

So I bought into the hype and am team I-bonds now. When I opened the account online I got the “unable to verify information“ spiel and the request to send form 5554. I got the signature guarantee from my bank and sent the form along by regular USPS mail, any data points on how long it should take for them to unlock my account?
Whakamole
Posts: 1765
Joined: Wed Jan 13, 2016 8:59 pm

Re: I Bonds variable rate @ 3.54% in May

Post by Whakamole »

Mel Lindauer wrote: Tue Oct 12, 2021 12:49 am
anon_investor wrote: Mon Oct 11, 2021 5:20 pm
Whakamole wrote: Mon Oct 11, 2021 4:56 pm https://tipswatch.com/2021/10/06/coming ... -a-decade/

We should get an idea of the new rate on Wednesday. Tips Watch is estimating 6.5%-7%.
That is Incredible!
Even for the 0% I Bonds, that rate will be nice for a risk-free Treasury issue. But then again, those who hold the older I Bonds with fixed rates that topped out as high as 3.6% will be getting around 10% or more. Not too shabby.
I wish I had backed up the truck when the fixed rate was high and you could pay using a credit card, to get rewards on top of this. I have some from those salad days.
User avatar
goodenyou
Posts: 3602
Joined: Sun Jan 31, 2010 10:57 pm
Location: Skating to Where the Puck is Going to Be..or on the golf course

Re: I Bonds variable rate @ 3.54% in May

Post by goodenyou »

Whakamole wrote: Tue Oct 12, 2021 9:43 am
Mel Lindauer wrote: Tue Oct 12, 2021 12:49 am
anon_investor wrote: Mon Oct 11, 2021 5:20 pm
Whakamole wrote: Mon Oct 11, 2021 4:56 pm https://tipswatch.com/2021/10/06/coming ... -a-decade/

We should get an idea of the new rate on Wednesday. Tips Watch is estimating 6.5%-7%.
That is Incredible!
Even for the 0% I Bonds, that rate will be nice for a risk-free Treasury issue. But then again, those who hold the older I Bonds with fixed rates that topped out as high as 3.6% will be getting around 10% or more. Not too shabby.
I wish I had backed up the truck when the fixed rate was high and you could pay using a credit card, to get rewards on top of this. I have some from those salad days.
That was about 22 years ago. I wish I had backed the truck up on a lot of investment opportunities 22 years ago that I know the results of today. The limits back then were $30,000 per SSN for paper I-bonds AND $30,000 electronically (TD) per year. A couple could purchase up to $120,000 per year back then too! I have a few $30,000 (x2) electronic (TD) I-Bond years starting back in 2005. It changed to $10,000 per SSN per year (TD) in 2008. Many investors felt stupid purchasing I-Bonds with such low returns during the GO-GO Internet Days of 1998-2000... :shock:

I dug up this gem:

https://www.marketwatch.com/story/profi ... e-cpi-data
"Ignorance more frequently begets confidence than does knowledge" | “At 50, everyone has the face he deserves”
User avatar
billthecat
Posts: 1052
Joined: Tue Jan 24, 2017 1:50 pm
Location: USA

Re: I Bonds variable rate @ 3.54% in May

Post by billthecat »

Is there any reason not to buy as many I Bonds as one can?
We cannot direct the winds but we can adjust our sails • It's later than you think • Ack! Thbbft!
mary1492
Posts: 716
Joined: Thu Oct 17, 2019 3:02 am

Re: I Bonds variable rate @ 3.54% in May

Post by mary1492 »

.....
Last edited by mary1492 on Thu Sep 29, 2022 8:18 am, edited 1 time in total.
User avatar
grogu
Posts: 258
Joined: Thu Jan 21, 2021 11:36 pm

Re: I Bonds variable rate @ 3.54% in May

Post by grogu »

goodenyou wrote: Tue Oct 12, 2021 10:13 am
Whakamole wrote: Tue Oct 12, 2021 9:43 am
Mel Lindauer wrote: Tue Oct 12, 2021 12:49 am
anon_investor wrote: Mon Oct 11, 2021 5:20 pm
Whakamole wrote: Mon Oct 11, 2021 4:56 pm https://tipswatch.com/2021/10/06/coming ... -a-decade/

We should get an idea of the new rate on Wednesday. Tips Watch is estimating 6.5%-7%.
That is Incredible!
Even for the 0% I Bonds, that rate will be nice for a risk-free Treasury issue. But then again, those who hold the older I Bonds with fixed rates that topped out as high as 3.6% will be getting around 10% or more. Not too shabby.
I wish I had backed up the truck when the fixed rate was high and you could pay using a credit card, to get rewards on top of this. I have some from those salad days.
That was about 22 years ago. I wish I had backed the truck up on a lot of investment opportunities 22 years ago that I know the results of today. The limits back then were $30,000 per SSN for paper I-bonds AND $30,000 electronically (TD) per year. A couple could purchase up to $120,000 per year back then too! I have a few $30,000 (x2) electronic (TD) I-Bond years starting back in 2005. It changed to $10,000 per SSN per year (TD) in 2008. Many investors felt stupid purchasing I-Bonds with such low returns during the GO-GO Internet Days of 1998-2000... :shock:

I dug up this gem:

https://www.marketwatch.com/story/profi ... e-cpi-data
If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.

But agreed that having a guaranteed 10% return for a 6-month period would be nice.
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: I Bonds variable rate @ 3.54% in May

Post by anon_investor »

grogu wrote: Tue Oct 12, 2021 2:02 pm
goodenyou wrote: Tue Oct 12, 2021 10:13 am
Whakamole wrote: Tue Oct 12, 2021 9:43 am
Mel Lindauer wrote: Tue Oct 12, 2021 12:49 am
anon_investor wrote: Mon Oct 11, 2021 5:20 pm

That is Incredible!
Even for the 0% I Bonds, that rate will be nice for a risk-free Treasury issue. But then again, those who hold the older I Bonds with fixed rates that topped out as high as 3.6% will be getting around 10% or more. Not too shabby.
I wish I had backed up the truck when the fixed rate was high and you could pay using a credit card, to get rewards on top of this. I have some from those salad days.
That was about 22 years ago. I wish I had backed the truck up on a lot of investment opportunities 22 years ago that I know the results of today. The limits back then were $30,000 per SSN for paper I-bonds AND $30,000 electronically (TD) per year. A couple could purchase up to $120,000 per year back then too! I have a few $30,000 (x2) electronic (TD) I-Bond years starting back in 2005. It changed to $10,000 per SSN per year (TD) in 2008. Many investors felt stupid purchasing I-Bonds with such low returns during the GO-GO Internet Days of 1998-2000... :shock:

I dug up this gem:

https://www.marketwatch.com/story/profi ... e-cpi-data
If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.

But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Going back in time to 1999, load up on Amazon right?
User avatar
goodenyou
Posts: 3602
Joined: Sun Jan 31, 2010 10:57 pm
Location: Skating to Where the Puck is Going to Be..or on the golf course

Re: I Bonds variable rate @ 3.54% in May

Post by goodenyou »

grogu wrote: Tue Oct 12, 2021 2:02 pm
goodenyou wrote: Tue Oct 12, 2021 10:13 am
Whakamole wrote: Tue Oct 12, 2021 9:43 am
Mel Lindauer wrote: Tue Oct 12, 2021 12:49 am
anon_investor wrote: Mon Oct 11, 2021 5:20 pm

That is Incredible!
Even for the 0% I Bonds, that rate will be nice for a risk-free Treasury issue. But then again, those who hold the older I Bonds with fixed rates that topped out as high as 3.6% will be getting around 10% or more. Not too shabby.
I wish I had backed up the truck when the fixed rate was high and you could pay using a credit card, to get rewards on top of this. I have some from those salad days.
That was about 22 years ago. I wish I had backed the truck up on a lot of investment opportunities 22 years ago that I know the results of today. The limits back then were $30,000 per SSN for paper I-bonds AND $30,000 electronically (TD) per year. A couple could purchase up to $120,000 per year back then too! I have a few $30,000 (x2) electronic (TD) I-Bond years starting back in 2005. It changed to $10,000 per SSN per year (TD) in 2008. Many investors felt stupid purchasing I-Bonds with such low returns during the GO-GO Internet Days of 1998-2000... :shock:

I dug up this gem:

https://www.marketwatch.com/story/profi ... e-cpi-data
If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.

But agreed that having a guaranteed 10% return for a 6-month period would be nice.
I would be buying Lottery tickets if I had a time machine.
"Ignorance more frequently begets confidence than does knowledge" | “At 50, everyone has the face he deserves”
Topic Author
tomsense76
Posts: 1428
Joined: Wed Oct 14, 2020 1:52 am

Re: I Bonds variable rate @ 3.54% in May

Post by tomsense76 »

Also we should get a better idea of what the variable rate will look like tomorrow (13 Oct 2021) as CPI data for Sept 2021 is scheduled to be released then

https://www.bls.gov/schedule/news_release/cpi.htm
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
User avatar
Mel Lindauer
Moderator
Posts: 35782
Joined: Mon Feb 19, 2007 7:49 pm
Location: Daytona Beach Shores, Florida
Contact:

Re: I Bonds variable rate @ 3.54% in May

Post by Mel Lindauer »

goodenyou wrote: Tue Oct 12, 2021 2:06 pm
grogu wrote: Tue Oct 12, 2021 2:02 pm
goodenyou wrote: Tue Oct 12, 2021 10:13 am
Whakamole wrote: Tue Oct 12, 2021 9:43 am
Mel Lindauer wrote: Tue Oct 12, 2021 12:49 am

Even for the 0% I Bonds, that rate will be nice for a risk-free Treasury issue. But then again, those who hold the older I Bonds with fixed rates that topped out as high as 3.6% will be getting around 10% or more. Not too shabby.
I wish I had backed up the truck when the fixed rate was high and you could pay using a credit card, to get rewards on top of this. I have some from those salad days.
That was about 22 years ago. I wish I had backed the truck up on a lot of investment opportunities 22 years ago that I know the results of today. The limits back then were $30,000 per SSN for paper I-bonds AND $30,000 electronically (TD) per year. A couple could purchase up to $120,000 per year back then too! I have a few $30,000 (x2) electronic (TD) I-Bond years starting back in 2005. It changed to $10,000 per SSN per year (TD) in 2008. Many investors felt stupid purchasing I-Bonds with such low returns during the GO-GO Internet Days of 1998-2000... :shock:

I dug up this gem:

https://www.marketwatch.com/story/profi ... e-cpi-data
If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.

But agreed that having a guaranteed 10% return for a 6-month period would be nice.
I would be buying Lottery tickets if I had a time machine.
And so would everyone else! Who would want to hold I Bonds for a minimum of a year when you can get instant gratification with an immediate lottery payout? 8-)
Best Regards - Mel | | Semper Fi
Thesaints
Posts: 5108
Joined: Tue Jun 20, 2017 12:25 am

Re: I Bonds variable rate @ 3.54% in May

Post by Thesaints »

grogu wrote: Tue Oct 12, 2021 2:02 pm If I had a time machine to go back to 1999, I wouldn't be buying I-Bonds (even--or especially not--with limits of up to $120k/year). You would have done much better investing in a stock fund (even with the dot-com and 2008 crashes), which is not surprising given a 22-year time horizon.

But agreed that having a guaranteed 10% return for a 6-month period would be nice.
Yep. Funny thing is that the return from May 2000 (3.60% fixed rate, highest value ever) to today would be +141%, but if one had invested in the S&P500 it would have been +368%.
Stocks bought at a non particularly good moment (a rather lousy one, actually!) handily beat the return of Savings Bonds bought at the best possible moment !!
Post Reply