Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

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mtwoy
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Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by mtwoy » Fri Nov 01, 2013 9:11 am

From TreasuryDirect:

"November 1, 2013

Effective today, Series EE savings bonds issued November 2013 through April 2014 will earn an annual fixed rate of 0.10% and Series I savings bonds will earn a composite rate of 1.38%, a portion of which is indexed to inflation every six months. The EE bond fixed rate applies to a bond’s 20-year original maturity. Bonds of both series have an interest-bearing life of 30 years.

Rates for savings bonds are set each May 1 and November 1. Interest accrues monthly and compounds semiannually. Bonds held less than five years are subject to a three-month interest penalty.

I Bond Earnings Rate of 1.38% includes a Fixed Rate of 0.20%
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 1.38% earnings rate for I bonds bought from November 2013 through April 2014 applies for the first six months after the issue date. The earnings rate combines a 0.20% fixed rate of return with the 1.18% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U increased from 232.773 in March 2013 to 234.149 in September 2013, a six-month increase of 0.59%."

http://www.treasurydirect.gov/news/pres ... atespr.htm

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Sammy_M
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Sammy_M » Fri Nov 01, 2013 9:13 am

0.2 fixed? That is a surprise.

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doug91
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by doug91 » Fri Nov 01, 2013 9:16 am

A pleasant surprise, even. Thanks for posting.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Grt2bOutdoors » Fri Nov 01, 2013 9:19 am

Sweeter on the I bonds. The EE bonds however have a distinctive sour taste to them. :(
They took the savings out of the traditional EE bond OR they've been reading my posts about the "doubling feature" making the bond a "true zero coupon bond" and placing all of the risk on the purchaser. :oops:
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by VictoriaF » Fri Nov 01, 2013 9:25 am

This is actually bad news. I am overwhelmed with cognitive biases:

1. I've bought my $10k worth of I Bonds early in the year, and now I feel the loss.

2. What should I do next year? Should I buy them early at 0.2% or wait?

Victoria
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by leonidas » Fri Nov 01, 2013 9:25 am

I buy 100 a week on a regular basis. The .20 Fixed rate is the first non zero fixed rate in a while and it is a pleasant surprise.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by jon-nyc » Fri Nov 01, 2013 9:25 am

I was expecting 0.1.

0.2 is a welcome surprise. I'm purchasing 10k later this month.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by jon-nyc » Fri Nov 01, 2013 9:27 am

VictoriaF wrote: 2. What should I do next year? Should I buy them early at 0.2% or wait?
Well, one option would be to buy 5k before May and 5k after.


In my case I intend to wait until late April and see where the 10Y TIPs are trading, and base my decision on that. (however imperfect a signal that may be).

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Faith20879 » Fri Nov 01, 2013 9:28 am

Thanks for the update!

Logged in BH earlier than usual just to look for this.

Faith

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Grt2bOutdoors » Fri Nov 01, 2013 9:28 am

I'm waiting until January - don't want to run afoul of the limitations rule.
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Kevin21 » Fri Nov 01, 2013 9:40 am

Very nice! (for me personally, not sure about macroeconomics)

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Iorek » Fri Nov 01, 2013 9:42 am

VictoriaF wrote:This is actually bad news. I am overwhelmed with cognitive biases:

1. I've bought my $10k worth of I Bonds early in the year, and now I feel the loss.

2. What should I do next year? Should I buy them early at 0.2% or wait?

Victoria
I know how you feel-- one year I got a 1% drop in my interest rate because I procrastinated/underestimated how long it would take to process my order. That said, by buying early you probably earned an extra $100 in interest, in which case I think it would take 5 years or so before you have any loss at all?

We tend to buy half our allotment in the Spring and half in the Fall, although some of that is because we wait to see if we have enough cash for the full allotment.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by hollowcave2 » Fri Nov 01, 2013 10:20 am

Finally!!!!!!!!!!!!!!!!!

An increase in the fixed rate is a surprise and I welcome it! It's about time. I think I'll step up my automatic purchases again.

Man, the EE bonds are at 0.10% Wow. That's tough. The only reason to hold EE bonds is to wait for them to double at 20 years. Almost like holding zero coupon bonds.

Looks like I-bonds have a clear advantage.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by jeff1949 » Fri Nov 01, 2013 10:21 am

I never thought I would be excited about a 0.20% rate. I remember when they dropped from 3.0% to 2.0% and I said I would never bother with them again.

I have a different perspective now. :oops:

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by englishgirl » Fri Nov 01, 2013 10:25 am

I might actually start buying I bonds again. Finally it's moved off 0% real. :)
Sarah

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by hollowcave2 » Fri Nov 01, 2013 10:28 am

Iorek wrote:
VictoriaF wrote:This is actually bad news. I am overwhelmed with cognitive biases:

1. I've bought my $10k worth of I Bonds early in the year, and now I feel the loss.

2. What should I do next year? Should I buy them early at 0.2% or wait?

Victoria
I know how you feel-- one year I got a 1% drop in my interest rate because I procrastinated/underestimated how long it would take to process my order. That said, by buying early you probably earned an extra $100 in interest, in which case I think it would take 5 years or so before you have any loss at all?

We tend to buy half our allotment in the Spring and half in the Fall, although some of that is because we wait to see if we have enough cash for the full allotment.

Actually, this is a simple problem to solve.

If you want the newer bonds, wait until the one year mark and then sell the I bonds you purchased earlier this year and roll them into the 0.2% fixed rate
I bonds. It would cost 3 months interest, but if you want to do that, you can.

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VictoriaF
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by VictoriaF » Fri Nov 01, 2013 10:29 am

englishgirl wrote:I might actually start buying I bonds again. Finally it's moved off 0% real. :)
You should. Dividing by zero brings infinite happiness {smile}.

Victoria
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by stevewolfe » Fri Nov 01, 2013 10:48 am

hollowcave2 wrote:Actually, this is a simple problem to solve.

If you want the newer bonds, wait until the one year mark and then sell the I bonds you purchased earlier this year and roll them into the 0.2% fixed rate
I bonds. It would cost 3 months interest, but if you want to do that, you can.
But that introduces the problem of now having consumed your 2014 allocation of $10k (in this example) at the expense of "losing" the 2013 allocation. So if you are trying to maintain a TIPS / I-Bond portfolio percentage like I am (and likely others) your net addition to your position is 0. In my case, I've done the same as Victoria (for me and my wife), so we'll just buy in 2014 and not sell our 2013 purchase as it's still better (IMHO) than Vanguard Inflation Protected Securities fund with a negative real yield and duration of approximately 8 years...

That said, WOOT! on the 0.20% fixed! I'm more shocked about that than I am at the EE at 0.10% frankly.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by hollowcave2 » Fri Nov 01, 2013 10:51 am

stevewolfe wrote:
hollowcave2 wrote:Actually, this is a simple problem to solve.

If you want the newer bonds, wait until the one year mark and then sell the I bonds you purchased earlier this year and roll them into the 0.2% fixed rate
I bonds. It would cost 3 months interest, but if you want to do that, you can.
But that introduces the problem of now having consumed your 2014 allocation of $10k (in this example) at the expense of "losing" the 2013 allocation. So if you are trying to maintain a TIPS / I-Bond portfolio percentage like I am (and likely others) your net addition to your position is 0. In my case, I've done the same as Victoria (for me and my wife), so we'll just buy in 2014 and not sell our 2013 purchase as it's still better (IMHO) than Vanguard Inflation Protected Securities fund with a negative real yield and duration of approximately 8 years...

That said, WOOT! on the 0.20% fixed! I'm more shocked about that than I am at the EE at 0.10% frankly.

You bring up a very good point about using next years allocation in simply keeping up with the fixed rate. Perhaps it's better just to continue purchasing unless the fixed rate gets very high.

As for me, I'm not chasing the 0.2% fixed rate. I'm just continuing purchases.

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Kevin21
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Kevin21 » Fri Nov 01, 2013 10:59 am

Sidenote and question --- is there a way to convert the older bonds to new purchases? Or just the standard sell, then re-buy from checking account?

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by bigfun » Fri Nov 01, 2013 11:00 am

I think my (noob) question was already answered here before I'm asking it, but does the 10K limit apply to bonds having been sold and then repurchased in addition to new money? In other words, if I bought 10K when the fixed rate was zero, I can sell those to buy new bonds, but that depletes my annual allocation, correct? Thanks! :happy

Edited to say that it has been over 1 year since I purchased said bonds.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Kevin21 » Fri Nov 01, 2013 11:05 am

bigfun wrote: In other words, if I bought 10K when the fixed rate was zero, I can sell those to buy new bonds, but that depletes my annual allocation, correct? Thanks! :happy
Correct.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Mel Lindauer » Fri Nov 01, 2013 11:08 am

Wow, what a surprise! I would have lost money betting on that. I guess they need the money.
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by stevewolfe » Fri Nov 01, 2013 11:25 am

Kevin21 wrote:Sidenote and question --- is there a way to convert the older bonds to new purchases? Or just the standard sell, then re-buy from checking account?
You can only buy these days (excluding over payment of income tax) at Treasury Direct. If you have the bond at TD already you should be able to redeem and elect to place the funds in the Certificate of Indebtedness account at TD instead of your checking account. You can then buy the new bond from the C of I account at TD (you can then sweep any excess to your checking from the C of I account if need be).

If you have paper bonds you'd have to redeem them at your bank and buy from your checking via TD. Hope that helps.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by stevewolfe » Fri Nov 01, 2013 11:26 am

Mel Lindauer wrote:Wow, what a surprise! I would have lost money betting on that. I guess they need the money.
Agreed 100% it is a shock that the rate is > 0.00%. If only we could hear the logic that went into adjusting the I-bond fixed rate to 0.20% as well as the logic behind cutting the EE from 0.20% to 0.10%...
Last edited by stevewolfe on Fri Nov 01, 2013 11:27 am, edited 1 time in total.

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mtwoy
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by mtwoy » Fri Nov 01, 2013 11:27 am

By my estimates (and someone should definitely check my math), it would take 18 months with the new 0.2% fixed rate to recoup the penalty of 3 months interest at 1.18% for selling I Bonds held less than 5 years to buy new bonds.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Sammy_M » Fri Nov 01, 2013 11:32 am

I'm feeling lazy so will ask - has anyone made or seen a calculator that computes whether you should sell old I-Bonds (held more than 12 mos) that had the 0% fixed to buy new ones at 0.2%? The calculation would need to consider the 3 months forfeited interest as well as the tax hit.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Kevin21 » Fri Nov 01, 2013 11:33 am

stevewolfe wrote:
Kevin21 wrote:Sidenote and question --- is there a way to convert the older bonds to new purchases? Or just the standard sell, then re-buy from checking account?
You can only buy these days (excluding over payment of income tax) at Treasury Direct. If you have the bond at TD already you should be able to redeem and elect to place the funds in the Certificate of Indebtedness account at TD instead of your checking account. You can then buy the new bond from the C of I account at TD (you can then sweep any excess to your checking from the C of I account if need be).

If you have paper bonds you'd have to redeem them at your bank and buy from your checking via TD. Hope that helps.
Helps very much --- I haven't sold a bond at TD yet, and always wondered what my C of I account was for!

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by mtwoy » Fri Nov 01, 2013 11:37 am

Sammy_M wrote:I'm feeling lazy so will ask - has anyone made or seen a calculator that computes whether you should sell old I-Bonds (held more than 12 mos) that had the 0% fixed to buy new ones at 0.2%? The calculation would need to consider the 3 months forfeited interest as well as the tax hit.
See my post just above yours. Note that I didn't account for taxes.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by #Cruncher » Fri Nov 01, 2013 11:39 am

I was surprised like everyone else. I expected the EE rate to increase substantially from the old 0.20% and the I Bond fixed rate to stay at 0%. (See my post, Re: When To Buy I Bonds and EE Bonds - Now or Wait?.) Wrong on both counts!

At least I waited until today to update my I Bond Web Site and my two I Bond spreadsheets: IBondMonthlyCalculator.html and IBondPortfolioCalculator.html.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Grt2bOutdoors » Fri Nov 01, 2013 11:41 am

#Cruncher wrote:I was surprised like everyone else. I expected the EE rate to increase substantially from the old 0.20% and the I Bond fixed rate to stay at 0%. (See my post, Re: When To Buy I Bonds and EE Bonds - Now or Wait?.) Wrong on both counts!

At least I waited until today to update my I Bond Web Site and my two I Bond spreadsheets: IBondMonthlyCalculator.html and IBondPortfolioCalculator.html.

EE bond is based off the 5 year note, not the 10 year. I thought your guessestimates were way off base but decided to say nothing and let the Treasury speak.
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Call_Me_Op » Fri Nov 01, 2013 11:41 am

Never thought I'd be excited about 0.2%.
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Mel Lindauer » Fri Nov 01, 2013 11:44 am

Call_Me_Op wrote:Never thought I'd be excited about 0.2%.
You're obviously not alone! :D
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Grt2bOutdoors » Fri Nov 01, 2013 11:45 am

stevewolfe wrote:
Mel Lindauer wrote:Wow, what a surprise! I would have lost money betting on that. I guess they need the money.
Agreed 100% it is a shock that the rate is > 0.00%. If only we could hear the logic that went into adjusting the I-bond fixed rate to 0.20% as well as the logic behind cutting the EE from 0.20% to 0.10%...
Here's my take on their thinking: they are adherents of the Bill Gross theory: Bond yields will remain persistently low for years to come. That means expectations are low inflation over the next bunch of years, but higher in the following decades. It would take a real contrarian to take a 10 basis point rate coupon today, when they could get a 20 basis point coupon in addition to potential inflation. In other words, the Treasury is hoping folks take the bait and buy the I bond, when the EE bond is likely to be the better play at year 20 edging out the return of the I bond.
Just look at the board reaction, how many are going to step up to the plate and take the 20 year gamble - or not? If Bill Gross was on the board, my bet is he would buy as much as he could today.
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by nisiprius » Fri Nov 01, 2013 11:51 am

VictoriaF wrote:This is actually bad news. I am overwhelmed with cognitive biases:

1. I've bought my $10k worth of I Bonds early in the year, and now I feel the loss.

2. What should I do next year? Should I buy them early at 0.2% or wait?

Victoria
You should convince yourself that 0.2% doesn't matter. On a maximum purchase of $10,000 it is $20 a year. Brief pause... did I get the decimal point in the right place? Yeah. So figure out how you can make it up by really organizing your grocery coupons, and get on with your life.

Think of it this way. Our policy is to dispense full-sized candy bars on Hallowe'en. Usually I buy packs of 36 at Costco for maybe $20. But last year we had only 12 trick-or-treaters. So my wife laid down the law, she said I was to buy no more than 16 bars tops. And we let the shopping go and I didn't have the car, so I walked to the supermarket, OK prices but not the best, where I was able to buy three 6-packs of full-sized candy bars for $6 each. My did not excoriate me for being two bars over.

And I'm thinking, "OK, rooked on the unit price, coulda got 36 for almost the same price, but at least I spent $2 less than I would have and we won't be tempted to eat a dozen leftover candy bars ourselves."

And then the kids start to arrive.

And when we're down to 3 bars, my wife, "Uh, honey, yeah, I guess you better get some more." And because we can hear another group arriving, I figure I don't have too much time so I hop in the car and drive to the supermarket and buy three more packs. So now I'm up to $36. Except, I drove two miles round trip, better figure $0.59 mile, so $37.18 And, fortunately, the last candy bar was taken by the last kid.

Oh, wait. I forgot. We hadn't done any decorating at all so when I bought the first bunch of candy bars I yield to impulse and also picked up a big smiling-scarecrow helium balloon for $9.99, bringing the total to $47.17, compared to $20 for last year buying at Costco and doing homemade crude decorations.

So, in ONE NIGHT, I "lost" $27.17 due to bad planning and faulty timing of the trick-or-treat market.

Now, about that 0.2% on a $10,000 investment....
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by kenyan » Fri Nov 01, 2013 12:20 pm

Color me surprised at the fixed rate. In the grand scheme of things, 0.2% is basically nothing, but I suppose in this era of minuscule interest rates, we've been conditioned to care about tenths of a percent.
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by letsgobobby » Fri Nov 01, 2013 12:25 pm

Grt2bOutdoors wrote:
stevewolfe wrote:
Mel Lindauer wrote:Wow, what a surprise! I would have lost money betting on that. I guess they need the money.
Agreed 100% it is a shock that the rate is > 0.00%. If only we could hear the logic that went into adjusting the I-bond fixed rate to 0.20% as well as the logic behind cutting the EE from 0.20% to 0.10%...
Here's my take on their thinking: they are adherents of the Bill Gross theory: Bond yields will remain persistently low for years to come. That means expectations are low inflation over the next bunch of years, but higher in the following decades. It would take a real contrarian to take a 10 basis point rate coupon today, when they could get a 20 basis point coupon in addition to potential inflation. In other words, the Treasury is hoping folks take the bait and buy the I bond, when the EE bond is likely to be the better play at year 20 edging out the return of the I bond.
Just look at the board reaction, how many are going to step up to the plate and take the 20 year gamble - or not? If Bill Gross was on the board, my bet is he would buy as much as he could today.
Do you think they're thinking that much about it?

I thought it was more like, "not enough people buying I bonds. Let's make them more attractive relative to EE bonds and TIPS." Or something.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by englishgirl » Fri Nov 01, 2013 12:30 pm

Oh my. Reactivating a dormant Treasury Direct account is a trip, let me tell ya.

The guy on the phone wanted me to remember my security image, what I'd called my security image, the exact date on which I last successfully logged in to TD, or failing that, the exact date on which I opened my TD account. Day, month, and year. Along with a gazillion other things as well. Poor guy. He was actually very impressed at my recall on many of the items, but I really just could not remember some of it*. What a ridiculous security farce. :|

Anyway, snapped up...drumroll....$25. I bet the Treasury is pretty pleased with themselves that they reeled in that big catch by raising the rates!





*Lucky for me, he said that he was convinced that I *was* the owner of the account but had to follow protocol and ask all the questions. But let me give one date as 1,2,3,4,5,6,7,8,19,10,11,12,13,14,15,16,17,18,19,20,21,22,23,24,25,26,27,28,29,30,31 of January,February,March,April,May....of a certain year. The right date was in there somewhere.
Sarah

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by VictoriaF » Fri Nov 01, 2013 12:31 pm

nisiprius wrote:
VictoriaF wrote:This is actually bad news. I am overwhelmed with cognitive biases:

1. I've bought my $10k worth of I Bonds early in the year, and now I feel the loss.

2. What should I do next year? Should I buy them early at 0.2% or wait?

Victoria
You should convince yourself that 0.2% doesn't matter. On a maximum purchase of $10,000 it is $20 a year. Brief pause... did I get the decimal point in the right place? Yeah. So figure out how you can make it up by really organizing your grocery coupons, and get on with your life.
I don't use coupons.

I stay in youth hostels at an average price of $40/night. $20/year x 30 years (life of the I Bond) = $600 / $40 = 15 nights at youth hostels lost by not waiting till November.

Victoria
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by nwffdiver » Fri Nov 01, 2013 12:41 pm

Mel Lindauer wrote:Wow, what a surprise! I would have lost money betting on that. I guess they need the money.

Funny , I asked earlier in the month if anybody knew what the new rates would be as usually you know by Oct15. Nobody expected it to be better so I bought $2k. Thankfully I still have 3 left to buy this year. :happy

wedsep
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by wedsep » Fri Nov 01, 2013 12:46 pm

mtwoy wrote:By my estimates (and someone should definitely check my math), it would take 18 months with the new 0.2% fixed rate to recoup the penalty of 3 months interest at 1.18% for selling I Bonds held less than 5 years to buy new bonds.
17.7 months on my calculator.

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SteelyEyed
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by SteelyEyed » Fri Nov 01, 2013 12:48 pm

Sammy_M wrote:I'm feeling lazy so will ask - has anyone made or seen a calculator that computes whether you should sell old I-Bonds (held more than 12 mos) that had the 0% fixed to buy new ones at 0.2%? The calculation would need to consider the 3 months forfeited interest as well as the tax hit.
If the tax bothers you, don't forget that you can roll them over to a 529. If I decide to sell any of my 0% I-bonds, I will likely consider it my annual 529 contriubtion and take a state income tax deduction on the rollover.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by zaboomafoozarg » Fri Nov 01, 2013 12:51 pm

kenyan wrote:Color me surprised at the fixed rate. In the grand scheme of things, 0.2% is basically nothing, but I suppose in this era of minuscule interest rates, we've been conditioned to care about tenths of a percent.
Basically nothing??? Why, that extra .2% will get you $617 more dollars of interest on a $10k I Bond purchase if you hold it for 30 years! :D

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market timer
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by market timer » Fri Nov 01, 2013 12:53 pm

VictoriaF wrote:I don't use coupons.

I stay in youth hostels at an average price of $40/night. $20/year x 30 years (life of the I Bond) = $600 / $40 = 15 nights at youth hostels lost by not waiting till November.

Victoria
Or 17 nights in Laos at $5/night instead of $40/night in Western Europe.

http://www.tripadvisor.com/Hotel_Review ... vince.html

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Carpe » Fri Nov 01, 2013 1:18 pm

As has already been stated, 0.2% on $10k is $20.

Putting this into further context:

- As of 10/29, the real yield on a 10 year TIPS is 0.40% (real rate realized and term risk avoided if held to maturity)
- As of 10/29, the real yield on a 20 year TIPS is 1.03% (real rate realized and term risk avoided if held to maturity)
- As of 10/29, the real yield on a 30 year TIPS is 1.33% (real rate realized and term risk avoided if held to maturity)

So, market timing aside (because we don't do that!), those with a longer term and perhaps clearer investment horizon can do a little better than 0.2% real using TIPS. Not complaining though, may buy some Ibonds early next year for funds that may or may not be needed in the shorter term.
Carpe: pick, pluck, pluck off, gather

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by letsgobobby » Fri Nov 01, 2013 1:36 pm

Carpe wrote:As has already been stated, 0.2% on $10k is $20.

Putting this into further context:

- As of 10/29, the real yield on a 10 year TIPS is 0.40% (real rate realized and term risk avoided if held to maturity)
- As of 10/29, the real yield on a 20 year TIPS is 1.03% (real rate realized and term risk avoided if held to maturity)
- As of 10/29, the real yield on a 30 year TIPS is 1.33% (real rate realized and term risk avoided if held to maturity)

So, market timing aside (because we don't do that!), those with a longer term and perhaps clearer investment horizon can do a little better than 0.2% real using TIPS. Not complaining though, may buy some Ibonds early next year for funds that may or may not be needed in the shorter term.
but unlike TIPS, I bonds can be tax-efficient in taxable space, effectively increasing tax-advantaged space.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by VictoriaF » Fri Nov 01, 2013 1:37 pm

Carpe wrote:As has already been stated, 0.2% on $10k is $20.

Putting this into further context:

- As of 10/29, the real yield on a 10 year TIPS is 0.40% (real rate realized and term risk avoided if held to maturity)
- As of 10/29, the real yield on a 20 year TIPS is 1.03% (real rate realized and term risk avoided if held to maturity)
- As of 10/29, the real yield on a 30 year TIPS is 1.33% (real rate realized and term risk avoided if held to maturity)

So, market timing aside (because we don't do that!), those with a longer term and perhaps clearer investment horizon can do a little better than 0.2% real using TIPS. Not complaining though, may buy some Ibonds early next year for funds that may or may not be needed in the shorter term.
I Bonds are good for taxable accounts, TIPS are not.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

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#Cruncher
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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by #Cruncher » Fri Nov 01, 2013 1:38 pm

Grt2bOutdoors wrote:EE bond is based off the 5 year note, not the 10 year. I thought your guessestimates were way off base but decided to say nothing and let the Treasury speak.
That's not what TreasuryDirect says! I was basing my projection on this quote from the How does Treasury decide on the interest rate? section on the TreasuryDirect May 2005 and Later EE Bond Rates and Terms web page:
We determine the fixed interest rate for EE Bonds issued after May 2005 by
  • taking the market yields of the 10-year Treasury Note, and
  • adjusting that by the value of components unique to savings bonds, including options that permit early redemption (redemption after the first 12 months) and tax deferral.
Could you have been thinking of this quote from the How does Treasury decide on the interest rate for these EE Bonds? section on the TreasuryDirect May 1997 through April 2005 (EE Bond Rates and Terms) web page?
For EE Bonds that we issued from May 1997 through April 2005, we determine the interest rate every May 1 and November 1 by
  • finding the average yields of 5-year Treasury securities for the previous six months
  • taking 90% of that number.
(underline added)
By the way, if you thought my "guessestimates were way off base", you should have spoken up before today. You might have kept some people from waiting for a higher rate that didn't materialize.

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by Carpe » Fri Nov 01, 2013 2:14 pm

letsgobobby wrote:
Carpe wrote:As has already been stated, 0.2% on $10k is $20.

Putting this into further context:

- As of 10/29, the real yield on a 10 year TIPS is 0.40% (real rate realized and term risk avoided if held to maturity)
- As of 10/29, the real yield on a 20 year TIPS is 1.03% (real rate realized and term risk avoided if held to maturity)
- As of 10/29, the real yield on a 30 year TIPS is 1.33% (real rate realized and term risk avoided if held to maturity)

So, market timing aside (because we don't do that!), those with a longer term and perhaps clearer investment horizon can do a little better than 0.2% real using TIPS. Not complaining though, may buy some Ibonds early next year for funds that may or may not be needed in the shorter term.
but unlike TIPS, I bonds can be tax-efficient in taxable space, effectively increasing tax-advantaged space.

VictoriaF wrote:
I Bonds are good for taxable accounts, TIPS are not.

Victoria
It is certainly up to each individual to decide what is most appropriate from a tax management point of view, but that should not detract from an understanding of what is available elsewhere in the market.
Carpe: pick, pluck, pluck off, gather

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Re: Nov 2013 I Bond Rate - 1.38% (0.20% Fixed)

Post by whomever » Fri Nov 01, 2013 2:35 pm

Reactivating a dormant Treasury Direct account is a trip, let me tell ya.
That sounds bad. I'm afraid to ask, but what does it take to trigger dormancy? I haven't logged in since buying last year's allotment, and was going to buy some this weekend...

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