Hey, I Bonds might not be a total disaster after CPI-U today

[robjer]

Anybody think the fixed will climb off Zero for May I bonds? Maybe to .02?

[BBL]

Keep hope alive - but I doubt it....

[STC]

How are IBonds a disaster currently. Better yield then TIPS. No principle risk. Sounds like a darn bargain to me!

[robjer]

Sorry, disaster was too strong.
Before today's CPI-U, it looked like May's bonds would have both a 0% inflation rate and a 0% fixed rate.
Maybe not a disaster, but no better than money in a mattress for 6 months for new bonds purchased in May.

[STC]

Sorry, disaster was too strong.
Before today's CPI-U, it looked like May's bonds would have both a 0% inflation rate and a 0% fixed rate.
Maybe not a disaster, but no better than money in a mattress for 6 months for new bonds purchased in May.

But a lot better then TIPS, and Nominal bonds at the moment. Sad state of fixed income...

[nisiprius]

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.

[crowd79]

What was the CPI-U number (2xx.xxx) released today? How does it compare to October of last year. Is it still lower? If yes, then we're still looking at a possible 0% for the next component...

[Dale_G]

Actually, taxpayers are better off if the inflation component is zero. There is never an advantage to pay taxes on inflationary gains. Now if the real rate was positive, I'd be happy to eventually pay taxes on that gain.

Dale

[dad2000]

What was the CPI-U number (2xx.xxx) released today? How does it compare to October of last year. Is it still lower? If yes, then we're still looking at a possible 0% for the next component...

I think I have this right:

Today (Feb 2013): 232.166
Sept 2012: 231.407

Sources:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
http://www.bls.gov/news.release/cpi.t01.htm

[robjer]

nisiprius, keep the personal attacks out of your response to me. No reason to tell me about myself.

My only point was that today's CPI-U might make the I Bonds for May better.
I didn't compare I Bonds to Tips or talk about any tax implications.

[crowd79]

What was the CPI-U number (2xx.xxx) released today? How does it compare to October of last year. Is it still lower? If yes, then we're still looking at a possible 0% for the next component...

I think I have this right:

Today (Feb 2013): 232.166
Sept 2012: 231.407

Sources:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
http://www.bls.gov/news.release/cpi.t01.htm

So, as it stands right now, the next component will be at least 0.65%, which will be higher (or lower) based on next month's CPI-U data.

[camaro327]

Anybody think the fixed will climb off Zero for May I bonds? Maybe to .02?

No, even if they only offer 0.66% that beats the heck out of the vast majority of savings account rates. Plus the index to inflation guarantee is better than what a typical savings account can offer.

[gkaplan]

nisiprius, keep the personal attacks out of your response to me. No reason to tell me about myself.

My only point was that today's CPI-U might make the I Bonds for May better.
I didn't compare I Bonds to Tips or talk about any tax implications.

You're a relatively new poster, but you should know that nisiprius is one of the most respected members in these forums. You should at least consider his advice before you dismiss it out of hand.

[DualIncomeNoDebt]

personal attacks

Didn't see his response as personal attack. Just a direct, informed response. A helpful one too.

[STC]

nisiprius, keep the personal attacks out of your response to me. No reason to tell me about myself....

You're a relatively new poster, but you should know that nisiprius is one of the most respected members in these forums. You should at least consider his advice before you dismiss it out of hand.

Nis is also notoriously curt with people, but gets a free pass by the admins due to his advisor status. A courtesy that is not extended to others who have "different" communication styles.

[If anyone feels that forum policy has been violated, please report the post ("!" in the top right corner). Members can always PM a moderator (or site admin) for an explanation if they disagree with a moderator action. --admin LadyGeek]

[nisiprius]

robjer, you are correct, and your retort was appropriate. I ought not to have made that remark and I apologize. I've removed it from my posting.

[gkaplan]

nisiprius, keep the personal attacks out of your response to me. No reason to tell me about myself....

You're a relatively new poster, but you should know that nisiprius is one of the most respected members in these forums. You should at least consider his advice before you dismiss it out of hand.

Nis is also notoriously curt with people, but gets a free pass by the admins due to his advisor status. A courtesy that is not extended to others who have "different" communication styles.

I think you have the wrong person.

[sscritic]

232.166 - 230.280 = 1.886
1.886 / 230.280 = .0082
.0082 x 12 = 0.983 or 9.83%

Alternative:
232.166 / 230.280 = 1.0082
1.0082 - 1 = .0082
.0082 x 12 = 0.983 or 9.83%

Do you love extrapolation as much as I do?

[BBL]

Do you love extrapolation as much as I do?

Ehhh extrapolation? I could take it or leave it.... But don't get me started on interpolation, now that's the ticket