Any chance the I Bonds fixed rate will increase in 2013?

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CoderDude
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Any chance the I Bonds fixed rate will increase in 2013?

Post by CoderDude »

I just bought I Bonds for the first time in Dec 2012, and plan to buy more in 2013. Anyone think the fixed rate may increase in May or Nov 2013? It's been at 0% for the last two years. Should I buy my 10k of I Bonds right now, or wait to see if rates change?
Call_Me_Op
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Re: Any chance the I Bonds fixed rate will increase in 2013?

Post by Call_Me_Op »

I will answer your question literally. I think it MAY increase.
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G-Money
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Re: Any chance the I Bonds fixed rate will increase in 2013?

Post by G-Money »

I'd say there's a non-zero chance the fixed rate will be non-zero this year. :)
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#Cruncher
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Re: Any chance the I Bonds fixed rate will increase in 2013?

Post by #Cruncher »

Very slim chance. In the past when the I Bond fixed rate was above 0%, it averaged about 1.0% less than the real interest rate on 10-year TIPS, and about 0.5% less than the rate on 5-year TIPS. Should this relationship hold in the future, it means that before the I Bond fixed rate is likely to rise above 0%, the yield on 10 and 5-year TIPS would have to increase about 1.6% - 1.9% points from their current levels of negative 0.62% and 1.36% respectively. (See Daily Treasury Real Yield Curve Rates.)

I document this in the post, Re: TIPS Real Yield vs I Bond Fixed Rate 1999 - 2011.
Grt2bOutdoors
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Re: Any chance the I Bonds fixed rate will increase in 2013?

Post by Grt2bOutdoors »

In my opinion, there is a zero percent chance of a fixed rate exceeding zero in the foreseeable future. If you want a fixed rate of something - buy both the EE bond which yields a current rate of 0.20% with no inflation buffer and the I bond and create yourself a hybrid vehicle that offers a small fixed rate and an inflation rate. That is what fixed income diversification can do for you. :D
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sscritic
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Re: Any chance the I Bonds fixed rate will increase in 2013?

Post by sscritic »

Grt2bOutdoors wrote:In my opinion, there is a zero percent chance of a fixed rate exceeding zero in the foreseeable future.
But I sold all my bonds on December 20 because I read on the internet that interest rates were going up. According to the post above yours (thanks, #Cruncher), once real rates get above 1%, the I bond fixed rate would be positive. Won't that happen this year? If not this year, sometime in the foreseeable future? I mean, if people can see interest rates rising, isn't that foreseeable? At least someone thinks so. :)

Oh, I see. In your opinion. Actually, in mine too. Which is why I lied about selling all my bonds on December 20.
Wellesley
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Re: Any chance the I Bonds fixed rate will increase in 2013?

Post by Wellesley »

Think it would be more likely that the Jets will walk off with the NFL Super Bowl cfhampionship a few weeks hence.

I am, however, a definite fan of I-Bonds, and greatly appreciate Mel's understanding of them early on and his thoughtfulness and large amount of work to wake up the rest of us.

Sincerely,

Harry
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kenyan
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Re: Any chance the I Bonds fixed rate will increase in 2013?

Post by kenyan »

Grt2bOutdoors wrote:In my opinion, there is a zero percent chance of a fixed rate exceeding zero in the foreseeable future. If you want a fixed rate of something - buy both the EE bond which yields a current rate of 0.20% with no inflation buffer and the I bond and create yourself a hybrid vehicle that offers a small fixed rate and an inflation rate. That is what fixed income diversification can do for you. :D
I agree. Technically, I suppose there is a non-zero chance, but to any reasonable scenario I can conceive of those rates are pegged at zero for more than the next year. There is no incentive for the treasury to increase rates, when they are already more attractive than similar marketable securities.
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