Why would changes in the CPI be expected to affect the fixed rate?
I don't expect to see increases in the fixed rate for a while.
Since I bonds can be redeemed in five years with no penalty and no interest rate sensitivity, they are directly comparable to a five-year TIPS held to maturity. They are currently paying more than a five-year TIPS; they are obviously a good deal, probably constrained by the Treasury being embarrassed or unable to offer a negative fixed rate or to eliminate the program entirely. Traditionally, they paid noticeably less than TIPS. This is clearly a case of "good time to buy." I don't think we will see a positive rate on I bonds until TIPS real rates rise a little bit into positive territory.
I bonds are no better when the CPI rises and no worse when it falls. If the CPI is zero, they are money in the mattress, but if the CPI is zero, there's nothing wrong with money in the mattress.
Last edited by nisiprius
on Fri Mar 15, 2013 3:28 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.