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I-Bond Rate

Posted: Thu Mar 15, 2012 9:38 am
by donall
I-Bond rates have recently been in the 3-4% range. The new rate (determined by CPI) may be much lower or even 0. Although any I-Bond purchased before May 1 will have a 3.06% rate for six months, it will then have a period of six months at the future much lower rate. Would contributors to this forum recommend buying I-Bonds before May 1?

Re: I-Bond Rate

Posted: Thu Mar 15, 2012 9:40 am
by Grt2bOutdoors
Buy now, before May 1st. A 1.53% annual rate is nothing to sneeze at. :moneybag

Re: I-Bond Rate

Posted: Thu Mar 15, 2012 9:51 am
by beareconomy
you have a few choices for the 2012 year in i bonds. I could buy before May 1 and get 3.06% for 6 months, then probably close to 0 for another six months for a total of 1.53% for the year. Sadly for fixed income today that is much better than 1 year cds that yield about 1%.

I would anticipate with the i bond in november the inflation factor will be large again looking at the economy. You could wait until then if you want to avoid that 6 months of 0%. Question is, what to do with the money in the meantime. Maybe do your ira and 401k first before the i bond allocation for 2012.

Re: I-Bond Rate

Posted: Thu Mar 15, 2012 10:37 am
by papito23
Go for it. Yes, 1.53% ain't bad. After crunching the numbers, timing I-Bonds (by waiting) didn't seem to make sense for me. Get them now and get the 12 month waiting period over so you can have flexibility. The nice bonus is that even if yields are 0% for the 2nd 6 months, you only forfeit the final 3 months... which is zero! So whatever happens, you'll have 1.53% as a minimum for 12 month.

Re: I-Bond Rate

Posted: Thu Mar 15, 2012 10:40 am
by beareconomy
That is another excellent point. If it is 0, the forfeit is 0, so you end up with 1.53% for the year which is better than a one year bond.

I say go for it. Buy your 10k at the end of april and get your 5k return from your income taxes for 15k this year.

Re: I-Bond Rate

Posted: Thu Mar 15, 2012 1:28 pm
by donall
Thanks for the feedback. I agree with your assessments, but it is rather sad that yields for safe, fixed investments are so low.

Re: I-Bond Rate

Posted: Fri Mar 16, 2012 10:11 am
by papito23
Data just came out this morning for February inflation. It doesn't seem to have made it to the massive gov't table yet (ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt) but this article (http://www.bls.gov/news.release/cpi.nr0.htm)lists Feb as 227.663.

[(Feb - Sep 2011)/Sep 2011] x 2 = 0.0068, or 0.68%

All things equal, the next yields starting May 1 will be 0.68%, +/- depending on what inflation does over the next two weeks (announced around tax time I presume). Your return after one year will be somewhere around 1.87% [(3.06+0.68)/2]. Then again, predicting inflation even 30 days out is probably like predicting the weather 30 days out. Use climate records as a guide stick, beyond that is probably guessing :)

Now, if I could just figure out how to hyperlink Words/Titles instead of the actual URLs, my posts would be a little cleaner... help, anyone? I've been selecting the link and click "URL".

Re: I-Bond Rate

Posted: Fri Mar 16, 2012 10:20 am
by sscritic
[quote="athada"]
Now, if I could just figure out how to hyperlink Words/Titles instead of the actual URLs, my posts would be a little cleaner... help, anyone? I've been selecting the link and click "[u]URL[/u]".[/quote]

Hold your mouse over the url button and don't move. You will then see [url=http://url] URL text [/url] as the method to use. Only URL text will appear, appropriately colored.

And yes, I have BBCode disabled for a reason, so please don't report me.

Re: I-Bond Rate

Posted: Fri Mar 16, 2012 11:58 am
by papito23
Thanks sscritic. Makes sense. And no clue what BBCode is, so your secret is safe with me!

Re: I-Bond Rate

Posted: Fri Mar 16, 2012 12:01 pm
by sscritic
athada wrote:Thanks sscritic. Makes sense. And no clue what BBCode is, so your secret is safe with me!
BBCode makes the quote appear as a quote and the url appear as a url. There is a check box at the bottom to disable it. If I had not disabled it, you would not have seen how to type the url, you would have seen something like this

Re: I-Bond Rate

Posted: Fri Mar 16, 2012 2:25 pm
by Snowjob
Is the 15 dollars really worth the time? seriously 1.5% of 10k.

Re: I-Bond Rate

Posted: Fri Mar 16, 2012 2:34 pm
by auntie
Snowjob wrote:Is the 15 dollars really worth the time? seriously 1.5% of 10k.
1.5% of 10 000 = 150

Re: I-Bond Rate

Posted: Fri Mar 16, 2012 2:40 pm
by Grt2bOutdoors
auntie wrote:
Snowjob wrote:Is the 15 dollars really worth the time? seriously 1.5% of 10k.
1.5% of 10 000 = 150
Glad to see you aren't mathematically challenged. :wink:

Re: I-Bond Rate

Posted: Fri Mar 16, 2012 3:06 pm
by Cosmo
athada wrote:Data just came out this morning for February inflation. It doesn't seem to have made it to the massive gov't table yet (ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt) but this article (http://www.bls.gov/news.release/cpi.nr0.htm)lists Feb as 227.663.

[(Feb - Sep 2011)/Sep 2011] x 2 = 0.0068, or 0.68%

All things equal, the next yields starting May 1 will be 0.68%, +/- depending on what inflation does over the next two weeks (announced around tax time I presume). Your return after one year will be somewhere around 1.87% [(3.06+0.68)/2]. Then again, predicting inflation even 30 days out is probably like predicting the weather 30 days out. Use climate records as a guide stick, beyond that is probably guessing :)

Now, if I could just figure out how to hyperlink Words/Titles instead of the actual URLs, my posts would be a little cleaner... help, anyone? I've been selecting the link and click "URL".
As you pointed out, it does not include the month of March. Given how much Feb moved, any similar move to March will change the yield significantly. Of course, *significantly* is all relative here.
Cosmo

Re: I-Bond Rate

Posted: Sat Apr 14, 2012 6:36 pm
by robjer
For the first 4 months since the September CPI-U was announced there was a chance that both the inflation component and the fixed component of the May 2012 I bonds would be ZERO.

However, the Feb and March CPI-U are going to give us a 2.2% inflation component and that improvement almost guarantees a zero % fixed when it's announced in May.

did the last two months CPI-U numbers surprise anybody else or was this just a coiled spring of inlation snapping back a bit?

I maxed out paper and electronic in October 2011 in wifes and my individual and trust accounts and maxed out electronic in both indiv/trust accounts in Late January in. Felt pretty good about at least the first 6 month rates on all that, but still don't understand why Treasury didn't raise the Electronic limit when they did away with paper.

So we can let China buy up as manny billions of dollars of our debt as they can stomach, but we restrict our own citizens to only $5,000?
Tell me, where is the logic?

Re: I-Bond Rate

Posted: Sat Apr 14, 2012 7:20 pm
by Mel Lindauer
robjer wrote:For the first 4 months since the September CPI-U was announced there was a chance that both the inflation component and the fixed component of the May 2012 I bonds would be ZERO.

However, the Feb and March CPI-U are going to give us a 2.2% inflation component and that improvement almost guarantees a zero % fixed when it's announced in May.

did the last two months CPI-U numbers surprise anybody else or was this just a coiled spring of inlation snapping back a bit?

I maxed out paper and electronic in October 2011 in wifes and my individual and trust accounts and maxed out electronic in both indiv/trust accounts in Late January in. Felt pretty good about at least the first 6 month rates on all that, but still don't understand why Treasury didn't raise the Electronic limit when they did away with paper.

So we can let China buy up as manny billions of dollars of our debt as they can stomach, but we restrict our own citizens to only $5,000?
Tell me, where is the logic?
Actually, the I Bond limit was raised to $10k per SS#, so, between you, your wife and your trust(s), you could purchase at least $30k per year (more if you have more than one trust).

Re: I-Bond Rate

Posted: Sat Apr 14, 2012 8:34 pm
by Cosmo
robjer wrote:For the first 4 months since the September CPI-U was announced there was a chance that both the inflation component and the fixed component of the May 2012 I bonds would be ZERO.

However, the Feb and March CPI-U are going to give us a 2.2% inflation component and that improvement almost guarantees a zero % fixed when it's announced in May.
According to this government web site, the rate might be a bit higher. The semi-annual change is around 1.3% or 2.6% annualized. I'll take it.

Cosmo

Re: I-Bond Rate

Posted: Sat Apr 14, 2012 9:38 pm
by hollowcave2
Since the estimated rate for May seems lower than the current 3.06% total rate now, it makes sense to purchase before May 1 to capture 6 months of the higher current rate. But you're not going to make a killing. Overall the long haul, it won't make much difference, but over a one year time frame, it might make sense.

Re: I-Bond Rate

Posted: Sun Apr 15, 2012 1:34 am
by robjer
Mel,

That's great news. I haven't even checked if they raised the limit.
As soon as I get off this board, I will do another $5K in each of our personal accounts and in each of our trust accounts.

Thanks for the info.

robj

Re: I-Bond Rate

Posted: Sun Apr 15, 2012 1:42 am
by robjer
Cosmo, I use the following site, and I only come up with 2.2%

http://www.ibonds.info/I-Bonds-and-CPI-U.aspx

Re: I-Bond Rate

Posted: Sun Apr 15, 2012 1:56 am
by Cosmo
robjer wrote:Cosmo, I use the following site, and I only come up with 2.2%

http://www.ibonds.info/I-Bonds-and-CPI-U.aspx
I stand corrected. The info in this Dept. of Labor link is also correct but I was looking at the wrong column. :oops:

Cosmo

Re: I-Bond Rate

Posted: Sun Apr 15, 2012 11:53 am
by Default User BR
robjer wrote:So we can let China buy up as manny billions of dollars of our debt as they can stomach, but we restrict our own citizens to only $5,000?
Tell me, where is the logic?
What? The Chinese aren't buying I-bonds, they are buying Treasuries. You too can buy as many of those as you can stomach.


Brian

Re: I-Bond Rate

Posted: Sun Apr 15, 2012 6:43 pm
by robjer
Brian, Yes, I know about what the Chinese buy.
Just saying that dropping the limit from the original $30,000 was a lame move.
They must have heard the complaints at least to reinstate the $10K limit.

Re: I-Bond Rate

Posted: Mon Apr 16, 2012 1:31 am
by Default User BR
robjer wrote:Brian, Yes, I know about what the Chinese buy.
Just saying that dropping the limit from the original $30,000 was a lame move.
Perhaps, but your reasoning made no sense.


Brian

Re: I-Bond Rate

Posted: Mon Apr 16, 2012 12:32 pm
by FB01
this post is confusing me.

On Friday, some posts said that with the with new figures coming on April 13th, it would be better to get the Ibonds before 4/30 but now this post talk about buying in May.

Can experts brief about it?

FB

Re: I-Bond Rate

Posted: Mon Apr 16, 2012 12:42 pm
by RobG
Mel Lindauer wrote: Actually, the I Bond limit was raised to $10k per SS#, so, between you, your wife and your trust(s), you could purchase at least $30k per year (more if you have more than one trust).
Does this mean that I could by $10k for myself, my wife, and my two kids for $40k total?

Re: I-Bond Rate

Posted: Mon Apr 16, 2012 1:06 pm
by Mel Lindauer
FB01 wrote:this post is confusing me.

On Friday, some posts said that with the with new figures coming on April 13th, it would be better to get the Ibonds before 4/30 but now this post talk about buying in May.

Can experts brief about it?

FB
You'll get a better known one year rate if you buy now. I see no reason to wait.

Re: I-Bond Rate

Posted: Mon Apr 16, 2012 1:40 pm
by sscritic
RobG wrote: Does this mean that I could by $10k for myself, my wife, and my two kids for $40k total?
Yes, if you are willing to make a gift to each child of $10k and put the I bonds in the equivalent of a UTMA, i.e., the bonds belong to your children, you use their ssns, and when the time comes, they pay the tax on the interest.

Re: I-Bond Rate

Posted: Mon Apr 16, 2012 1:44 pm
by FB01
Mel Lindauer wrote:
FB01 wrote:this post is confusing me.

On Friday, some posts said that with the with new figures coming on April 13th, it would be better to get the Ibonds before 4/30 but now this post talk about buying in May.

Can experts brief about it?

FB
You'll get a better known one year rate if you buy now. I see no reason to wait.
Thanks Mel...for the clarification

Re: I-Bond Rate

Posted: Mon Apr 16, 2012 8:31 pm
by robjer
Brian, i'll dispute your contention and ask to see your Board Moderator Badge.
HA!

Reasoning is simple: China buying up tons of U.S. debt at the same time as a nice vehicle for the average schumuck (I Bonds) become more retricted.

I remember at the time limits were first dropped from $30K, I speculated that Treasury was figuing on increasing inflation and would have to honor those I Bonds at higher rates so they cut back.

My point is the retail investor makes no splash in the overall Bond Market, so why cut him off at the knees.

Pretty simple reasoning, I think.

Re: I-Bond Rate

Posted: Tue Apr 17, 2012 2:19 pm
by Default User BR
robjer wrote:Brian, i'll dispute your contention and ask to see your Board Moderator Badge.
I don't understand your reasoning here either. I made no attempt to moderate you or your posting. I said that your reasoning in the matter at hand made no sense. I didn't say you couldn't post it, or that you were violating rules by doing so. I'd prefer you didn't make unfounded allegations like this.
Reasoning is simple: China buying up tons of U.S. debt at the same time as a nice vehicle for the average schumuck (I Bonds) become more retricted.
And this still doesn't make any sense with a repeat. The "average schmuck" has just as much opportunity to purchase Federal debt as the Chinese do.
I remember at the time limits were first dropped from $30K, I speculated that Treasury was figuing on increasing inflation and would have to honor those I Bonds at higher rates so they cut back.
Again, what does this have to do with the Chinese? I'll also point out that they are selling you all the TIPS you want.
Pretty simple reasoning, I think.
Simple, perhaps. Sensible? Not so much.

If you have something new to add besides baseless allegations of forum-copping or a repeat of your previous assertions, I'll be happy to read and consider. Otherwise I think we're done here.


Brian

Re: I-Bond Rate

Posted: Tue Apr 17, 2012 5:03 pm
by robjer
Brian, i don't know what your problem is here.
Maybe manage your own postings would be a better task for you.

Re: I-Bond Rate

Posted: Wed Apr 18, 2012 10:38 am
by Default User BR
robjer wrote:Brian, i don't know what your problem is here.
Maybe manage your own postings would be a better task for you.
You seem to have the mistaken idea that no one is allowed to disagree with you. I am not "managing" your posting, I am saying that you are wrong about the CONTENT that you put out. I would suggest you stop looking for hidden motivations and deal with the real.


Brian