WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
https://www.washingtonpost.com/business ... ite-crash/
Inflation-linked U.S. bonds crashed the TreasuryDirect website
Americans searching for a respite from inflation flooded the antiquated site trying to buy Series I savings bonds
People searching for a respite from inflation have flooded the Treasury Department phone lines and website to try to buy Series I savings bonds, causing much longer waits than usual. It’s the latest example of outdated government computer systems causing anguish for Americans.
[Content in excess of copyright fair use removed by admin LadyGeek]
Inflation-linked U.S. bonds crashed the TreasuryDirect website
Americans searching for a respite from inflation flooded the antiquated site trying to buy Series I savings bonds
People searching for a respite from inflation have flooded the Treasury Department phone lines and website to try to buy Series I savings bonds, causing much longer waits than usual. It’s the latest example of outdated government computer systems causing anguish for Americans.
[Content in excess of copyright fair use removed by admin LadyGeek]
Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
Thanks for the story link, I expect you've copied more than the allowable text of the article though...
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Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
My mistake, I didn't know. I'm sorry, and it won't happen again.
Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
Glad I didn't go for this. I-bonds have had a shining year, but their historical performance is nothing special compared to other kinds of bonds. Keep it simple!
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Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
You seem to be overlooking the fact that the early I Bonds paid (and continue to pay) from 3.0% to 3.6% PLUS inflation. That was definitely special when compared to other kinds of risk-free bonds that didn't even keep up with inflation. And the I Bonds were and are tax-deferred as well as free from state and local taxation. So they were (and still are) something special.
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Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
Series I savings bonds have no interest rate risk. Every kind of marketable bond has interest rate risk. That makes I bonds very special.
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Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
Tamalak is right, Mel. While the 3.0% to 3.6% I Bonds certainly do have advantages over "other kinds of bonds", their "historical performance" isn't one of them, but is instead "nothing special". First let's compare them to TIPS. There were eleven auctions of 10 and 30-year TIPS during the time I Bonds had these high fixed rates. In all eleven cases the TIPS yield was more than the fixed rate of an I Bond bought the month of the auction.Mel Lindauer wrote: ↑Fri May 20, 2022 2:39 pmYou seem to be overlooking the fact that the early I Bonds paid (and continue to pay) from 3.0% to 3.6% PLUS inflation. That was definitely special when compared to other kinds of risk-free bonds that didn't even keep up with inflation. ...
Code: Select all
---------------- T I P S --------------- I Bond TIPS v
Coupon Term Matures Auction Yield Rate I Bond
3.625% 10 1/15/2008 10/07/1998 3.651% 3.400% 0.251%
3.875% 10 1/15/2009 1/06/1999 3.898% 3.300% 0.598%
3.875% 30 4/15/2029 4/07/1999 3.899% 3.300% 0.599%
3.875% 10 1/15/2009 7/07/1999 4.040% 3.300% 0.740%
3.875% 30 4/15/2029 10/06/1999 4.138% 3.300% 0.838%
4.250% 10 1/15/2010 1/12/2000 4.338% 3.400% 0.938%
4.250% 10 1/15/2010 7/12/2000 4.030% 3.600% 0.430%
3.875% 30 4/15/2029 10/11/2000 3.953% 3.600% 0.353%
3.500% 10 1/15/2011 1/10/2001 3.522% 3.400% 0.122%
3.500% 10 1/15/2011 7/11/2001 3.500% 3.000% 0.500%
3.375% 30 4/15/2032 10/10/2001 3.465% 3.000% 0.465%
Code: Select all
Row Col A Col B Col C Col D Col E Col F Col G Col H Formula in Column B copied to Column H
1 Settlement 5/23/2022
2 Treasury coupon 5.250% 5.250% 6.125% 6.250% 6.250% 5.375% 5.375%
3 Matures 11/15/2028 2/15/2029 8/15/2029 5/15/2030 5/15/2030 2/15/2031 2/15/2031
4 Issued 11/16/1998 2/16/1999 8/16/1999 2/15/2000 8/15/2000 2/15/2001 8/15/2001
5 Auction price 99.25300 99.28200 99.74100 98.77100 107.86000 98.75300 97.90000
6 Bid price Friday 114.31250 114.86250 121.82500 124.79375 124.79375 120.00625 120.00625
7 Treasury return 5.61% 5.62% 6.57% 6.85% 6.15% 5.96% 6.05% =YIELD(B4,$B1,B2,B5,B6,2,1)
8 I Bond fixed rate 3.30% 3.30% 3.30% 3.40% 3.60% 3.40% 3.00%
9 $100 I Bond grows to 369.76 360.36 351.40 349.84 352.60 326.28 291.76
10 Nbr 6-month periods 47.0 46.5 45.5 44.5 43.5 42.5 41.5 =2*(YEAR($B1)-YEAR(B4))+(MONTH($B1)-MONTH(B4))/6
11 I Bond return 5.64% 5.59% 5.60% 5.71% 5.88% 5.64% 5.23% =2*((B9/100)^(1/B10)-1)
12 Treas better/(worse) (0.03%) 0.03% 0.97% 1.14% 0.27% 0.31% 0.82% =B7-B11
The table above shows that I Bonds lack of interest rate risk is a two-edged sword. It protects them if interest rates rise. But it hurts them if interest rates fall. The regular Treasury bonds are all priced above par because interest rates are now lower. But the price of the I Bonds does not benefit from real rates now being lower than the 3.0% to 3.6% when they were issued.
Sources:
- TIPS auction yields: next-to-right column of this web page (edited to add)
- Friday's Ask Bid Prices for 30-year regular Treasury bonds: WSJ Treasury Quotes
- I Bond fixed rates: What have rates been in the past?
- 30-year regular Treasury auction prices and $100 I Bond redemption values May 2022:
- 5.250% Treasury auction 11/5/1998 and 3.3% I Bond Nov 1998
- 5.250% Treasury auction 2/11/1999 and 3.3% I Bond Feb 1999
- 6.125% Treasury auction 8/12/1999 and 3.3% I Bond Aug 1999
- 6.250% Treasury auction 2/10/2000 and 3.4% I Bond Feb 2000
- 6.250% Treasury auction 8/10/2000 and 3.6% I Bond Aug 2000
- 5.375% Treasury auction 2/08/2001 and 3.4% I Bond Feb 2001
- 5.375% Treasury auction 8/09/2001 and 3.0% I Bond Aug 2001
Last edited by #Cruncher on Sat May 21, 2022 10:22 pm, edited 2 times in total.
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Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
The tax deferred nature of I Bonds has to have some after-tax benefit compared to TIPS and nominal treasuries held outside an IRA.#Cruncher wrote: ↑Sat May 21, 2022 5:01 pmTamalak is right, Mel. While the 3.0% to 3.6% I Bonds certainly do have advantages over "other kinds of bonds", their "historical performance" isn't one of them, but is instead "nothing special". First let's compare them to TIPS. There were eleven auctions of 10 and 30-year TIPS during the time I Bonds had these high fixed rates. In all eleven cases the TIPS yield was more than the fixed rate of an I Bond bought the month of the auction.Mel Lindauer wrote: ↑Fri May 20, 2022 2:39 pmYou seem to be overlooking the fact that the early I Bonds paid (and continue to pay) from 3.0% to 3.6% PLUS inflation. That was definitely special when compared to other kinds of risk-free bonds that didn't even keep up with inflation. ...Now lets compare them to regular non-inflation-indexed Treasuries. There were seven auctions of 30-year Treasury bonds from September 1998 (when I Bonds were first issued) through the end of 2001. The table below calculates the return of these bonds assuming they were sold on Friday. It then compares that return to the nominal return of I Bonds bought the month of the auction and redeemed this month. In the first two of the seven cases the returns were almost identical. But in the other five cases the return of the regular Treasury bonds was from 0.27% to 1.14% points higher than the I Bond's return.Code: Select all
---------------- T I P S --------------- I Bond TIPS v Coupon Term Matures Auction Yield Rate I Bond 3.625% 10 1/15/2008 10/07/1998 3.651% 3.400% 0.251% 3.875% 10 1/15/2009 1/06/1999 3.898% 3.300% 0.598% 3.875% 30 4/15/2029 4/07/1999 3.899% 3.300% 0.599% 3.875% 10 1/15/2009 7/07/1999 4.040% 3.300% 0.740% 3.875% 30 4/15/2029 10/06/1999 4.138% 3.300% 0.838% 4.250% 10 1/15/2010 1/12/2000 4.338% 3.400% 0.938% 4.250% 10 1/15/2010 7/12/2000 4.030% 3.600% 0.430% 3.875% 30 4/15/2029 10/11/2000 3.953% 3.600% 0.353% 3.500% 10 1/15/2011 1/10/2001 3.522% 3.400% 0.122% 3.500% 10 1/15/2011 7/11/2001 3.500% 3.000% 0.500% 3.375% 30 4/15/2032 10/10/2001 3.465% 3.000% 0.465%
Code: Select all
Row Col A Col B Col C Col D Col E Col F Col G Col H Formula in Column B copied to Column H 1 Settlement 5/23/2022 2 Treasury coupon 5.250% 5.250% 6.125% 6.250% 6.250% 5.375% 5.375% 3 Matures 11/15/2028 2/15/2029 8/15/2029 5/15/2030 5/15/2030 2/15/2031 2/15/2031 4 Issued 11/16/1998 2/16/1999 8/16/1999 2/15/2000 8/15/2000 2/15/2001 8/15/2001 5 Auction price 99.25300 99.28200 99.74100 98.77100 107.86000 98.75300 97.90000 6 Bid price Friday 114.31250 114.86250 121.82500 124.79375 124.79375 120.00625 120.00625 7 Treasury return 5.61% 5.62% 6.57% 6.85% 6.15% 5.96% 6.05% =YIELD(B4,$B1,B2,B5,B6,2,1) 8 I Bond fixed rate 3.30% 3.30% 3.30% 3.40% 3.60% 3.40% 3.00% 9 $100 I Bond grows to 369.76 360.36 351.40 349.84 352.60 326.28 291.76 10 Nbr 6-month periods 47.0 46.5 45.5 44.5 43.5 42.5 41.5 =2*(YEAR($B1)-YEAR(B4))+(MONTH($B1)-MONTH(B4))/6 11 I Bond return 5.64% 5.59% 5.60% 5.71% 5.88% 5.64% 5.23% =2*((B9/100)^(1/B10)-1) 12 Treas better/(worse) (0.03%) 0.03% 0.97% 1.14% 0.27% 0.31% 0.82% =B7-B11
The table above shows that I Bonds lack of interest rate risk is a two-edged sword. It protects them if interest rates rise. But it hurts them if interest rates fall. The regular Treasury bonds are all priced above par because interest rates are now lower. But the price of the I Bonds does not benefit from real rates now being lower than the 3.0% to 3.6% when they were issued.
Sources:
- Friday's Ask Prices for 30-year regular Treasury bonds: WSJ Treasury Quotes
- I Bond fixed rates: What have rates been in the past?
- 30-year regular Treasury auction prices and $100 I Bond redemption values May 2022:
- 5.250% Treasury auction 11/5/1998 and 3.3% I Bond Nov 1998
- 5.250% Treasury auction 2/11/1999 and 3.3% I Bond Feb 1999
- 6.125% Treasury auction 8/12/1999 and 3.3% I Bond Aug 1999
- 6.250% Treasury auction 2/10/2000 and 3.4% I Bond Feb 2000
- 6.250% Treasury auction 8/10/2000 and 3.6% I Bond Aug 2000
- 5.375% Treasury auction 2/08/2001 and 3.4% I Bond Feb 2001
- 5.375% Treasury auction 8/09/2001 and 3.0% I Bond Aug 2001
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Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
I don't know how many of us realized it at the time (when IBonds were paying over 3% real), but they were the nearly ideal investment - an investment with 30-year tax deferral, 3+ real return, can never lose value, Government guaranteed, state-tax exemption, and zero interest-rate risk. I can't kick myself too hard because I don't think I heard about them until the early 2000's (when the rate was down to 1%-2%) and started buying then.Mel Lindauer wrote: ↑Fri May 20, 2022 2:39 pmYou seem to be overlooking the fact that the early I Bonds paid (and continue to pay) from 3.0% to 3.6% PLUS inflation. That was definitely special when compared to other kinds of risk-free bonds that didn't even keep up with inflation. And the I Bonds were and are tax-deferred as well as free from state and local taxation. So they were (and still are) something special.
Best regards, -Op |
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Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
I-bonds inflation protection and lack of interest rate risk makes them the safest investible security. That makes them special. The only security that would be as safe or perhaps safer would be a real perpetual Treasury bond. The Treasury in recent years has been urged by some financial experts, most notably John Cochrane, to issue real perpetuals, but so far neither the US Treasury nor any other government has issued any real perpetuals.
BobK
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Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
In addition, the return for the next six months is above the projected inflation rate, because of the lag in adjustments. (It was even better if you bought in April, as you locked in 12 months of past inflation rather than just 6.) Thus it is particularly attractive to buy I-Bonds now, and not to sell any that you currently hold until you get the inflation adjustment.
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Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
That type of risk free return is incredibly special. I wonder if we'll ever see anything like that again.Mel Lindauer wrote: ↑Fri May 20, 2022 2:39 pmYou seem to be overlooking the fact that the early I Bonds paid (and continue to pay) from 3.0% to 3.6% PLUS inflation. That was definitely special when compared to other kinds of risk-free bonds that didn't even keep up with inflation. And the I Bonds were and are tax-deferred as well as free from state and local taxation. So they were (and still are) something special.
Re: WashPo: Inflation-linked U.S. bonds crashed the TreasuryDirect website
They are special indeed. So special, in fact, tomorrow I am getting Trust documents notarized so I can score an additional $10k in a TD entity account. This will be my first Trust in my nearly six decades.bobcat2 wrote: ↑Sun May 22, 2022 9:37 am I-bonds inflation protection and lack of interest rate risk makes them the safest investible security. That makes them special. The only security that would be as safe or perhaps safer would be a real perpetual Treasury bond. The Treasury in recent years has been urged by some financial experts, most notably John Cochrane, to issue real perpetuals, but so far neither the US Treasury nor any other government has issued any real perpetuals.
BobK
I only hope that I don't have issues opening the TD eniity account...!
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