November 1 2014 I Bond Inflation Component
November 1 2014 I Bond Inflation Component
So the September 2014 CPI-U came out today at 238.031.
The March 2014 CPI-U was 236.293.
Therefore, if my calculations are right, the new inflation component rate for November 1 I Bonds will be 1.48%. (Corrected - see Cruncher post below - thank you.)
That's not terrible, but lower than the May 2014 inflation component rate of 1.84% (accompanied by a 0.1% Fixed Rate that resulted in a composite rate of 1.94%). Of course, we have no idea what the November 2014 fixed rate will be ...
March 2014 236.293
September 2014 238.031
238.031 - 236.293 = 1.738
1.738 / 236.293 = 0.00735527501 = % change over 6 months
0.00735527501 x 2 = 0.01471055003 = Annual Rate
November 2014 inflation component rate for I Bond = 1.48 % (Correction here and elsewhere because of feedback from sscritic - thank you.)
http://www.usinflationcalculator.com/in ... 3-to-2008/
http://www.interest.com/cd-rates/news/s ... rest-rate/
http://www.bls.gov/news.release/pdf/cpi.pdf
The March 2014 CPI-U was 236.293.
Therefore, if my calculations are right, the new inflation component rate for November 1 I Bonds will be 1.48%. (Corrected - see Cruncher post below - thank you.)
That's not terrible, but lower than the May 2014 inflation component rate of 1.84% (accompanied by a 0.1% Fixed Rate that resulted in a composite rate of 1.94%). Of course, we have no idea what the November 2014 fixed rate will be ...
March 2014 236.293
September 2014 238.031
238.031 - 236.293 = 1.738
1.738 / 236.293 = 0.00735527501 = % change over 6 months
0.00735527501 x 2 = 0.01471055003 = Annual Rate
November 2014 inflation component rate for I Bond = 1.48 % (Correction here and elsewhere because of feedback from sscritic - thank you.)
http://www.usinflationcalculator.com/in ... 3-to-2008/
http://www.interest.com/cd-rates/news/s ... rest-rate/
http://www.bls.gov/news.release/pdf/cpi.pdf
Last edited by LK2012 on Wed Oct 22, 2014 12:54 pm, edited 1 time in total.
Re: November 1 2014 I Bond Inflation Component
A couple of points, LK:LK2012 wrote:Therefore, if my calculations are right, the new inflation component rate for November 1 I Bonds will be 1.47%.
- The Treasury rounds the semi-annual rate to four decimal places. So it will round 0.007355275 to 0.0074; and twice that would be 1.48%.
- Doubling the semi-annual inflation rate and adding it to the fixed rate may produce an inaccurate composite rate when the fixed rate is large. For example, the next composite rate for an I Bond with a 3.60% fixed rate will be 5.11%, a little higher than if one just added 1.48% to 3.60%.
(See Combining the two rates on TreasuryDirect.)
Code: Select all
5.11% = 0.0510664 = 0.0360 + ( 2 * 0.0074 ) + ( 0.0360 * 0.0074 )
Re: November 1 2014 I Bond Inflation Component
Thank you, Cruncher.#Cruncher wrote:A couple of points, LK:LK2012 wrote:Therefore, if my calculations are right, the new inflation component rate for November 1 I Bonds will be 1.47%.
- The Treasury rounds the semi-annual rate to four decimal places. So it will round 0.007355275 to 0.0074; and twice that would be 1.48%.
- Doubling the semi-annual inflation rate and adding it to the fixed rate may produce an inaccurate composite rate when the fixed rate is large. For example, the next composite rate for an I Bond with a 3.60% fixed rate will be 5.11%, a little higher than if one just added 1.48% to 3.60%.
(See Combining the two rates on TreasuryDirect.)Code: Select all
5.11% = 0.0510664 = 0.0360 + ( 2 * 0.0074 ) + ( 0.0360 * 0.0074 )
Well, we can only hope for such miscalculations in the future ... I certainly wish we had those big fixed rates to look forward to again sometime soon ...
Re: November 1 2014 I Bond Inflation Component
Thanks for posting this. Still a better deal than most other fixed-income options out there, IMHO.
I suppose any talk of what the fixed component might be would just be speculation? Has anyone come up with any semi-reliable way to predict the upcoming fixed component? Or is it like guessing if the S&P 500 will be up or down tomorrow?
I suppose any talk of what the fixed component might be would just be speculation? Has anyone come up with any semi-reliable way to predict the upcoming fixed component? Or is it like guessing if the S&P 500 will be up or down tomorrow?
Re: November 1 2014 I Bond Inflation Component
I'm actually in the process of deciding how much to buy in ibonds (for my parents) before the rate changes. I have $55k budgeted for ibonds (obviously purchases over time), but am not sure how much to do now and how much to do in November. Is there any way to gauge what the new fixed rate might be?
And I see Atgard just asked my same question
And I see Atgard just asked my same question
Re: November 1 2014 I Bond Inflation Component
You're welcome. See Cruncher's correction that the Nov. 1 rate will be 1.48%.Atgard wrote:Thanks for posting this. Still a better deal than most other fixed-income options out there, IMHO.
I suppose any talk of what the fixed component might be would just be speculation? Has anyone come up with any semi-reliable way to predict the upcoming fixed component? Or is it like guessing if the S&P 500 will be up or down tomorrow?
Every 0.01% helps these days ...
Now I'm planning to finish out my I Bond purchases for this year before the end of October.
I really wish I had a clue about the Fixed Rate. Safest assumption is that it will stay the same or revert to zero. Any increase would be such a nice surprise. The almost non-existent Fixed Rates for so many years now makes the I Bond a less powerful tool than it used to be. Although it remains a helpful option in these ridiculously unrewarding times for savers.
I did find this, which suggests it will remain a mystery until the Treasury announces it:
"The Treasury sets the Series I Savings Bond fixed base-rate administratively, which means the criteria it uses aren’t public information."
http://www.savings-bond-advisor.com/ser ... ase-rates/
Re: November 1 2014 I Bond Inflation Component
Bought half tonight. Will try my luck and buy the second half after November 1.
Re: November 1 2014 I Bond Inflation Component
I guess the new rates won't be posted until tomorrow? Still showing pre-Oct 31 rate.
http://www.treasurydirect.gov/indiv/pro ... glance.htm
http://www.treasurydirect.gov/indiv/pro ... glance.htm
Re: November 1 2014 I Bond Inflation Component
z-man wrote:I guess the new rates won't be posted until tomorrow? Still showing pre-Oct 31 rate.
http://www.treasurydirect.gov/indiv/pro ... glance.htm
http://www.treasurydirect.gov/indiv/res ... dterms.htmTreasury wrote:Treasury announces the fixed rate for I Bonds every six months (on the first business day in May and on the first business day in November). ...
Re: November 1 2014 I Bond Inflation Component
I just googled and found some speculative article saying the composite rates would probably be around 0.8% or 0.9%. I hope it's at least greater than 1%. Not investing much, but am putting a little bit in each month as part of my EF. I doubt I'd do this for the next 6 months if I'm not making at least 1%. If it actually is 1.48% + 0.1% give or take, I'll still do it.
- Phineas J. Whoopee
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Re: November 1 2014 I Bond Inflation Component
I'd suspect 3 November, the first weekday of the month, will be when we see the announcement. It may or may not come out first thing in the morning. I imagine the Treasury has more urgent messages to communicate, and anyhow, it isn't beneficial to buy savings bonds at the beginning of the month in the first place so precisely when it's announced should make little practical difference.z-man wrote:I guess the new rates won't be posted until tomorrow? Still showing pre-Oct 31 rate.
http://www.treasurydirect.gov/indiv/pro ... glance.htm
PJW
- Phineas J. Whoopee
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Re: November 1 2014 I Bond Inflation Component
The composite rate for bonds bought in November can't be less than 1.48%, because the real, fixed rate, per Congress, can never be negative. The worst case is 1.48% variable with 0.00% fixed. Later on, of course, in the event of deflation exceeding one's real rates, the composite rate could be zero, but then many recent I Bonds would be returning a higher real rate than before. I'm hoping never to see such a situation again, because of the damage deflation inflicts on an economy, whether or not my own collection of I bonds would benefit.ab80 wrote:I just googled and found some speculative article saying the composite rates would probably be around 0.8% or 0.9%. I hope it's at least greater than 1%. Not investing much, but am putting a little bit in each month as part of my EF. I doubt I'd do this for the next 6 months if I'm not making at least 1%. If it actually is 1.48% + 0.1% give or take, I'll still do it.
PJW
Re: November 1 2014 I Bond Inflation Component
via http://www.treasurydirect.gov/news/pres ... di1114.htmI Bond Earnings Rate of 1.48% includes a Fixed Rate of 0.00%
The earnings rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the life of the bond, and the semiannual inflation rate. The 1.48% earnings rate for I bonds bought from November 2014 through April 2015 applies for the first six months after the issue date. The earnings rate combines a 0.00% fixed rate of return with the 1.48% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U increased from 236.293 in March 2014 to 238.031 in September 2014, a six-month increase of 0.74%.
A bit underwhelming.
"You've got to be old with money because to be old without it is just too awful, you've got to be |
one or the other, either young or with money, you can't be old and without it."
Re: November 1 2014 I Bond Inflation Component
I am glad I purchased my 10K on October 28th, at least I get that 0.1% fixed lol....
- Phineas J. Whoopee
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Re: November 1 2014 I Bond Inflation Component
For completeness, EEs are 0.10%, the 20-year doubling term is unchanged, so at exactly 20 years they would have yielded 3.53%.
PJW
PJW
Re: November 1 2014 I Bond Inflation Component
I always buy my EEs 1st of calendar year, so i will load up my 10K on January 1, 2015, this 3.53% is very attractive....
Re: November 1 2014 I Bond Inflation Component
You have a gift for understatement.dyeusdi wrote:via http://www.treasurydirect.gov/news/pres ... di1114.htmI Bond Earnings Rate of 1.48% includes a Fixed Rate of 0.00%
The earnings rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the life of the bond, and the semiannual inflation rate. The 1.48% earnings rate for I bonds bought from November 2014 through April 2015 applies for the first six months after the issue date. The earnings rate combines a 0.00% fixed rate of return with the 1.48% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U increased from 236.293 in March 2014 to 238.031 in September 2014, a six-month increase of 0.74%.
A bit underwhelming.
Re: November 1 2014 I Bond Inflation Component
Me too. I was going to wait but that 0.1 is pretty juicy isn't it?ArthurO wrote:I am glad I purchased my 10K on October 28th, at least I get that 0.1% fixed lol....
We don't know where we are, or where we're going -- but we're making good time.
Re: November 1 2014 I Bond Inflation Component
But only half as juicy as 0.2!Browser wrote:Me too. I was going to wait but that 0.1 is pretty juicy isn't it?ArthurO wrote:I am glad I purchased my 10K on October 28th, at least I get that 0.1% fixed lol....
In a low rate environment, I'm happy to hold my .2's and a .1
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Re: November 1 2014 I Bond Inflation Component
You're kidding right?Angst wrote:But only half as juicy as 0.2!Browser wrote:Me too. I was going to wait but that 0.1 is pretty juicy isn't it?ArthurO wrote:I am glad I purchased my 10K on October 28th, at least I get that 0.1% fixed lol....
In a low rate environment, I'm happy to hold my .2's and a .1
Sorry to say, I was right on the 0.50% rate going away on the EE bond.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: November 1 2014 I Bond Inflation Component
Yeah, now the EE is just about a real zero coupon bond, with a nil yield on the current coupon.ArthurO wrote:I always buy my EEs 1st of calendar year, so i will load up my 10K on January 1, 2015, this 3.53% is very attractive....
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Re: November 1 2014 I Bond Inflation Component
Ugh, back to 0. Hopefully the drought is less than three years this time (2010-2013).
I bought $2500 before May, $5000 before November and now I have to decide if another $2500 makes sense. It probably does for me, since that will fill out my EF.
I bought $2500 before May, $5000 before November and now I have to decide if another $2500 makes sense. It probably does for me, since that will fill out my EF.
Re: November 1 2014 I Bond Inflation Component
Agreed, EEs only make sense if you lock for 20 years and don't touch them, you have to have a mindset to do that. I will buy until I am 55, and will have 20K coming in until I will be 75. I will not lock for 20 years at the age of 60, I will not be happy waiting until after I die to get the reward, but that age is still way off,Grt2bOutdoors wrote:Yeah, now the EE is just about a real zero coupon bond, with a nil yield on the current coupon.ArthurO wrote:I always buy my EEs 1st of calendar year, so i will load up my 10K on January 1, 2015, this 3.53% is very attractive....
Hopefully rates in 10-20 years will be good enough that EEs will make sense as a shorter term investment vehicles...
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Re: November 1 2014 I Bond Inflation Component
Ugh. These rates make me want to cash in my ibonds and pay down my mortgage.
An elephant for a dime is only a good deal if you need an elephant and have a dime.
Re: November 1 2014 I Bond Inflation Component
my mortgage interest is 2.75 and with tax breaks is less than 2%, so I won't trade my ibonds to pay that, it is a wash...bungalow10 wrote:Ugh. These rates make me want to cash in my ibonds and pay down my mortgage.
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Re: November 1 2014 I Bond Inflation Component
ArthurO wrote:my mortgage interest is 2.75 and with tax breaks is less than 2%, so I won't trade my ibonds to pay that, it is a wash...bungalow10 wrote:Ugh. These rates make me want to cash in my ibonds and pay down my mortgage.
Mine is at 2.375%... so, yeah. But the tax break really isn't that great, the standard deduction is attractive.
An elephant for a dime is only a good deal if you need an elephant and have a dime.
Re: November 1 2014 I Bond Inflation Component
I can't believe you got 2.375 rate, you must have paid points to get that... i do pay principle and hope to have it paid in 2 years but not with cost of not investing I or EE bonds....bungalow10 wrote:ArthurO wrote:my mortgage interest is 2.75 and with tax breaks is less than 2%, so I won't trade my ibonds to pay that, it is a wash...bungalow10 wrote:Ugh. These rates make me want to cash in my ibonds and pay down my mortgage.
Mine is at 2.375%... so, yeah. But the tax break really isn't that great, the standard deduction is attractive.
I Bond Composite Rates Effective November 2014
For those interested, here are the composite rates that will take effect from November 2014 - April 2015 and run for six months for all outstanding I Bonds, including newly issued ones with a 0.00% fixed rate. They incorporate the new semi-annual inflation rate of 0.74%:
For example if you buy a 0.00% fixed rate I Bond from November through April, you will earn at an annual rate of 1.48% for the first six months. If you bought in October 2009 or October 2014 when the fixed rate was 0.10%, you will earn at an annual rate of 1.58% for the six month period beginning April 1 2015. These composite rates summarize the 1114 column near the left side of the I Bond Composite Rates triangle. The source is TreasuryDirect's What have the rates been in the past?.
* Composite rates are computed as follows:
Code: Select all
Fixed Rate Announced Fixed Composite
# Times First Last Rates Rates
------- ------ ------ ----- ---------
1 May 00 3.60% 5.11% *
3 Sep 98 Nov 00 3.40% 4.91%
2 Nov 98 May 99 3.30% 4.80%
1 May 01 3.00% 4.50%
2 Nov 01 May 02 2.00% 3.49%
1 Nov 02 1.60% 3.09%
2 May 06 Nov 06 1.40% 2.89%
1 May 07 1.30% 2.79%
Code: Select all
2 May 05 Nov 07 1.20% 2.69%
2 May 03 Nov 03 1.10% 2.59%
3 May 04 Nov 05 1.00% 2.49%
1 Nov 08 0.70% 2.19%
1 Nov 09 0.30% 1.78%
2 May 10 Nov 13 0.20% 1.68%
2 May 09 May 14 0.10% 1.58%
8 May 08 Nov 14 0.00% 1.48%
* Composite rates are computed as follows:
Code: Select all
composite rate = fixed rate + ( 2 X inflation rate ) + ( fixed rate X inflation rate )
0.0511 = 0.0360 + ( 2 X 0.0074 ) + ( 0.0360 X 0.0074 )
Re: November 1 2014 I Bond Inflation Component
Thanks for this chart, Cruncher, very useful!