Can I buy DirectTreasury bonds or I-bonds in brokerages?

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Topic Author
anaparafunds
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Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by anaparafunds »

Can I buy DirectTreasury bonds or I-bonds in brokerages like Vanguard and Fidelity? :o
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anon_investor
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by anon_investor »

anaparafunds wrote: Tue Jul 20, 2021 6:05 pm Can I buy DirectTreasury bonds or I-bonds in brokerages like Vanguard and Fidelity? :o
EE Bonds can only be bought at Treasury Direct. I Bonds can only be bought at Treasury Direct or via Federal income tax refund.
Topic Author
anaparafunds
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by anaparafunds »

anon_investor wrote: Tue Jul 20, 2021 6:08 pm
anaparafunds wrote: Tue Jul 20, 2021 6:05 pm Can I buy DirectTreasury bonds or I-bonds in brokerages like Vanguard and Fidelity? :o
EE Bonds can only be bought at Treasury Direct. I Bonds can only be bought at Treasury Direct or via Federal income tax refund.
Thanks!

Any similarly performing bonds on brokerages?
ivk5
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by ivk5 »

XY problem.

Why are you focused on the brokerage platform?
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anon_investor
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by anon_investor »

anaparafunds wrote: Wed Jul 21, 2021 3:46 am
anon_investor wrote: Tue Jul 20, 2021 6:08 pm
anaparafunds wrote: Tue Jul 20, 2021 6:05 pm Can I buy DirectTreasury bonds or I-bonds in brokerages like Vanguard and Fidelity? :o
EE Bonds can only be bought at Treasury Direct. I Bonds can only be bought at Treasury Direct or via Federal income tax refund.
Thanks!

Any similarly performing bonds on brokerages?
Unfortunately no.
Jablean
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Joined: Sat Jun 02, 2018 2:38 pm

Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by Jablean »

But you can get into TIPs which are related but not identical.
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Wiggums
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by Wiggums »

anaparafunds wrote: Tue Jul 20, 2021 6:05 pm Can I buy DirectTreasury bonds or I-bonds in brokerages like Vanguard and Fidelity? :o
EE & I Bonds can only be bought at Treasury Direct or via Federal income tax refund.
Topic Author
anaparafunds
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by anaparafunds »

Wiggums wrote: Wed Jul 21, 2021 4:33 pm
anaparafunds wrote: Tue Jul 20, 2021 6:05 pm Can I buy DirectTreasury bonds or I-bonds in brokerages like Vanguard and Fidelity? :o
EE & I Bonds can only be bought at Treasury Direct or via Federal income tax refund.
anon_investor wrote: Wed Jul 21, 2021 5:14 am
anaparafunds wrote: Wed Jul 21, 2021 3:46 am
anon_investor wrote: Tue Jul 20, 2021 6:08 pm
anaparafunds wrote: Tue Jul 20, 2021 6:05 pm Can I buy DirectTreasury bonds or I-bonds in brokerages like Vanguard and Fidelity? :o
EE Bonds can only be bought at Treasury Direct. I Bonds can only be bought at Treasury Direct or via Federal income tax refund.
Thanks!

Any similarly performing bonds on brokerages?
Unfortunately no.
Thanks.
Jablean wrote: Wed Jul 21, 2021 4:20 pm But you can get into TIPs which are related but not identical.
Are tips better than ibonds? Can you buy those in brokerages?
bhough
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by bhough »

Dear OP,

Before you invest, please consider buying/reading the following book: The Bond Book by Annette Thau. It would behoove you to understand rates/yields, par, discount, premium, risk, tax implications, etc. before you invest. Just my 2 cents.

b
dbr
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by dbr »

anaparafunds wrote: Wed Jul 21, 2021 5:06 pm

Are tips better than ibonds? Can you buy those in brokerages?
There is a secondary market for TIPS.

The question which is better does not mean anything. They are just different in a lot of ways and they are the same in the fact that the face value of a bond is periodically indexed according to the intervening inflation in a period. A significant difference is that because there is no secondary market to buy I bonds the value of the bond at redemption is fixed excepting certain redemption rules at Treasury Direct.
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#Cruncher
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by #Cruncher »

dbr wrote: Thu Jul 22, 2021 3:21 pm... [TIPS and I Bonds] are the same in the fact that the face value of a bond is periodically indexed according to the intervening inflation in a period.
To be picky, only the face value of a TIPS is separately inflation-indexed. The value of an I Bond combines the effect of inflation and its fixed rate in a single value. This results in a quite different pattern of cash flow, but with an equivalent rate of return. To illustrate, here is a comparison of a 1% fixed rate $10,000 I Bond redeemed after 5 years with $10,000 face value of a 1% coupon 5-year TIPS purchased at par. Both are assumed subject to a constant 1% semi-annual increase in the CPI.

Code: Select all

  Fixed rate / coupon           1%
Semi-annual inflation           1%
 Composite rate / IRR        3.01% [1]    3.01% [2]                          3.01% [2]
                         ------- I Bond ------     ------------ TIPS ------------
                           Value     Cash Flow     Principal Interest   Cash Flow

Code: Select all

             Jul 2021    10,000.00  (10,000.00)    10,000.00           (10,000.00)
             Jan 2022    10,150.50         -       10,100.00    50.50       50.50 
             Jul 2022    10,303.27         -       10,201.00    51.01       51.01 
             Jan 2023    10,458.33         -       10,303.01    51.52       51.52 
             Jul 2023    10,615.73         -       10,406.04    52.03       52.03 
             Jan 2024    10,775.49         -       10,510.10    52.55       52.55 
             Jul 2024    10,937.66         -       10,615.20    53.08       53.08 
             Jan 2025    11,102.28         -       10,721.35    53.61       53.61 
             Jul 2025    11,269.37         -       10,828.57    54.14       54.14 
             Jan 2026    11,438.97         -       10,936.85    54.68       54.68 
             Jul 2026    11,611.13   11,611.13     11,046.22    55.23   11,101.45
The I Bond is like a savings account where interest is left in the account to grow along with the initial deposit. At the end of 5 years the I Bond holder can "withdraw" the accumulated $11,611.13, but the TIPS inflation-indexed face value has only grown to $11,046.22. However, the TIPS holder has been collecting interest every six months. When this is factored in, the TIPS returns 3.01% just like the I Bond.
  1. Every six months the Treasury computes a new composite rate for each I Bond using the formula shown here.

    Code: Select all

    composite rate = fixed rate + (2 * inflation rate) + (fixed rate * inflation rate)
             3.01% = 0.01       + (2 * 0.01)           + (0.01       * 0.01)
  2. 3.01% is twice the Internal Rate of Return calculated with the Excel IRR function.
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anon_investor
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by anon_investor »

#Cruncher wrote: Fri Jul 23, 2021 7:33 am
dbr wrote: Thu Jul 22, 2021 3:21 pm... [TIPS and I Bonds] are the same in the fact that the face value of a bond is periodically indexed according to the intervening inflation in a period.
To be picky, only the face value of a TIPS is separately inflation-indexed. The value of an I Bond combines the effect of inflation and its fixed rate in a single value. This results in a quite different pattern of cash flow, but with an equivalent rate of return. To illustrate, here is a comparison of a 1% fixed rate $10,000 I Bond redeemed after 5 years with $10,000 face value of a 1% coupon 5-year TIPS purchased at par. Both are assumed subject to a constant 1% semi-annual increase in the CPI.

Code: Select all

  Fixed rate / coupon           1%
Semi-annual inflation           1%
 Composite rate / IRR        3.01% [1]    3.01% [2]                          3.01% [2]
                         ------- I Bond ------     ------------ TIPS ------------
                           Value     Cash Flow     Principal Interest   Cash Flow

Code: Select all

             Jul 2021    10,000.00  (10,000.00)    10,000.00           (10,000.00)
             Jan 2022    10,150.50         -       10,100.00    50.50       50.50 
             Jul 2022    10,303.27         -       10,201.00    51.01       51.01 
             Jan 2023    10,458.33         -       10,303.01    51.52       51.52 
             Jul 2023    10,615.73         -       10,406.04    52.03       52.03 
             Jan 2024    10,775.49         -       10,510.10    52.55       52.55 
             Jul 2024    10,937.66         -       10,615.20    53.08       53.08 
             Jan 2025    11,102.28         -       10,721.35    53.61       53.61 
             Jul 2025    11,269.37         -       10,828.57    54.14       54.14 
             Jan 2026    11,438.97         -       10,936.85    54.68       54.68 
             Jul 2026    11,611.13   11,611.13     11,046.22    55.23   11,101.45
The I Bond is like a savings account where interest is left in the account to grow along with the initial deposit. At the end of 5 years the I Bond holder can "withdraw" the accumulated $11,611.13, but the TIPS inflation-indexed face value has only grown to $11,046.22. However, the TIPS holder has been collecting interest every six months. When this is factored in, the TIPS returns 3.01% just like the I Bond.
  1. Every six months the Treasury computes a new composite rate for each I Bond using the formula shown here.

    Code: Select all

    composite rate = fixed rate + (2 * inflation rate) + (fixed rate * inflation rate)
             3.01% = 0.01       + (2 * 0.01)           + (0.01       * 0.01)
  2. 3.01% is twice the Internal Rate of Return calculated with the Excel IRR function.
But how does that work today where an I Bond has a 0% fixed value and TIPS have a negative face value?
Destiple
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by Destiple »

Do interest rates affect TIPS too or just inflation ? Any other factors that effect TIPS
dbr
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by dbr »

Destiple wrote: Fri Jul 23, 2021 8:43 am Do interest rates affect TIPS too or just inflation ? Any other factors that effect TIPS
Yes, TIPS market pricing is affected by real interest rates.
MishkaWorries
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by MishkaWorries »

dbr wrote: Fri Jul 23, 2021 8:46 am
Destiple wrote: Fri Jul 23, 2021 8:43 am Do interest rates affect TIPS too or just inflation ? Any other factors that effect TIPS
Yes, TIPS market pricing is affected by real interest rates.
If you sell the Tip bond before maturity you have interest rate risk (it can be either good or bad). If you hold the Tip
ind until maturity you don't have to worry about interest risk.
We plan. G-d laughs.
dbr
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by dbr »

MishkaWorries wrote: Fri Jul 23, 2021 8:52 am
dbr wrote: Fri Jul 23, 2021 8:46 am
Destiple wrote: Fri Jul 23, 2021 8:43 am Do interest rates affect TIPS too or just inflation ? Any other factors that effect TIPS
Yes, TIPS market pricing is affected by real interest rates.
If you sell the Tip bond before maturity you have interest rate risk (it can be either good or bad). If you hold the Tip
ind until maturity you don't have to worry about interest risk.
Yes, that is important. But to add to it, the price of a bond at auction and hence the yield to maturity is affected by real interest rates at purchase. A difference is that the redemption in real dollars is known in advance, the coupon is known in advance, the purchase price at auction is known when the auction closes, the purchase price on the market varies but is known at the time of purchase pending bid/ask spread, but the selling price you can get on the market before maturity is variable as is the amount of markup as inflation occurs.
exodusNH
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Re: Can I buy DirectTreasury bonds or I-bonds in brokerages?

Post by exodusNH »

#Cruncher wrote: Fri Jul 23, 2021 7:33 am
dbr wrote: Thu Jul 22, 2021 3:21 pm... [TIPS and I Bonds] are the same in the fact that the face value of a bond is periodically indexed according to the intervening inflation in a period.
To be picky, only the face value of a TIPS is separately inflation-indexed. The value of an I Bond combines the effect of inflation and its fixed rate in a single value. This results in a quite different pattern of cash flow, but with an equivalent rate of return. To illustrate, here is a comparison of a 1% fixed rate $10,000 I Bond redeemed after 5 years with $10,000 face value of a 1% coupon 5-year TIPS purchased at par. Both are assumed subject to a constant 1% semi-annual increase in the CPI.

Code: Select all

  Fixed rate / coupon           1%
Semi-annual inflation           1%
 Composite rate / IRR        3.01% [1]    3.01% [2]                          3.01% [2]
                         ------- I Bond ------     ------------ TIPS ------------
                           Value     Cash Flow     Principal Interest   Cash Flow

Code: Select all

             Jul 2021    10,000.00  (10,000.00)    10,000.00           (10,000.00)
             Jan 2022    10,150.50         -       10,100.00    50.50       50.50 
             Jul 2022    10,303.27         -       10,201.00    51.01       51.01 
             Jan 2023    10,458.33         -       10,303.01    51.52       51.52 
             Jul 2023    10,615.73         -       10,406.04    52.03       52.03 
             Jan 2024    10,775.49         -       10,510.10    52.55       52.55 
             Jul 2024    10,937.66         -       10,615.20    53.08       53.08 
             Jan 2025    11,102.28         -       10,721.35    53.61       53.61 
             Jul 2025    11,269.37         -       10,828.57    54.14       54.14 
             Jan 2026    11,438.97         -       10,936.85    54.68       54.68 
             Jul 2026    11,611.13   11,611.13     11,046.22    55.23   11,101.45
The I Bond is like a savings account where interest is left in the account to grow along with the initial deposit. At the end of 5 years the I Bond holder can "withdraw" the accumulated $11,611.13, but the TIPS inflation-indexed face value has only grown to $11,046.22. However, the TIPS holder has been collecting interest every six months. When this is factored in, the TIPS returns 3.01% just like the I Bond.
  1. Every six months the Treasury computes a new composite rate for each I Bond using the formula shown here.

    Code: Select all

    composite rate = fixed rate + (2 * inflation rate) + (fixed rate * inflation rate)
             3.01% = 0.01       + (2 * 0.01)           + (0.01       * 0.01)
  2. 3.01% is twice the Internal Rate of Return calculated with the Excel IRR function.
It also important to remember that TIPS can be adjusted down for deflation.
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