When does Treasury Direct announce new iBond rates?

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Aguilar
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When does Treasury Direct announce new iBond rates?

Post by Aguilar »

When does Treasury Direct announce new iBond rates?

I was told to wait till then to decide whether to lock in the current rate or buy when the new rate goes into effect.
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retired@50
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Re: When does Treasury Direct announce new iBond rates?

Post by retired@50 »

Aguilar wrote: Sat Mar 18, 2023 12:56 pm When does Treasury Direct announce new iBond rates?

I was told to wait till then to decide whether to lock in the current rate or buy when the new rate goes into effect.
This is answered in the I savings bonds wiki page. May 1 and November 1.

https://www.bogleheads.org/wiki/I_savings_bonds

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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anon_investor
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Re: When does Treasury Direct announce new iBond rates?

Post by anon_investor »

Aguilar wrote: Sat Mar 18, 2023 12:56 pm When does Treasury Direct announce new iBond rates?

I was told to wait till then to decide whether to lock in the current rate or buy when the new rate goes into effect.
TD will not tell you until after the new rate goes into effect.

Check out https://tipswatch.com/, there is good analysis and guestimates about the rates discussed.
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Re: When does Treasury Direct announce new iBond rates?

Post by #Cruncher »

Aguilar wrote: Sat Mar 18, 2023 12:56 pmWhen does Treasury Direct announce new iBond rates?
TreasuryDirect will announce three I Bond rates on May 1st. [1]
  • Fixed rate: applies for the life of the bond.
  • Inflation rate: increase in the CPI over the six months from September 2022 to March 2023.
  • Composite rate: the annual rate I Bonds purchased May through October will earn during their first six months. It combines the fixed and inflation rates.
However, the inflation rate will be known before May 1st. On April 12 the Bureau of Labor Statistics will release the March CPI. Anyone can then compute the inflation rate by looking at this table and determining March's increase over September's 296.808. It will be combined not only with the fixed rate announced May 1st but also with the fixed rate of every outstanding I Bond to determine its annual composite rate for the six months starting on the next semi-annual anniversary of its purchase month.

Therefore, on April 12 we can know how much an I Bond purchased before the end of the month will earn for the next twelve months. April through September 2023 it will earn at the annual 6.89% current composite rate. For illustration assuming the March 2023 CPI is a 1.5% increase over September 2022, it will then earn at a 3.41% [2] annual rate for the six months October 2023 through March 2024. Therefore a $25 I Bond bought this April would have a value of $26.30 on 4/1/2024. [3]
25 * (1 + 0.0689 / 2) --> 25.86 * (1 + 0.0341 / 2) --> 26.30

However, we won't know until May 1st what an I Bond purchased May through October will earn. It will depend on the fixed rate which won't be known until it is announced. If it happens to stay the same at 0.4%, then a new purchase will earn at the same 3.41% annual rate an April purchase earns its second six months. But it will earn this for its first six months. What it will earn its second six months will depend on the increase in the CPI from March to September 2023.
  1. Here is the previous announcement on November 1, 2022:
    I Bond Composite Rate of 6.89% includes a Fixed Rate of 0.40%
    The composite rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the 30-year life of the bond, and the semiannual inflation rate. The 6.89% composite rate for I bonds bought from November 2022 through April 2023 applies for the first six months after the issue date. The composite rate combines a 0.40'% fixed rate of return with the 6.48% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U increased from 287.504 in March 2022 to 296.808 in September 2022, a six-month change of 3.24%.
  2. The composite rate is determined by the following formula and then rounded to two percentage places.

    Code: Select all

    composite rate = fixed rate + 2 * inflation rate + fixed rate * inflation rate
         0.0689296 = 0.004      + 2 * 0.0324         + 0.004      * 0.0324
         0.0340600 = 0.004      + 2 * 0.0150         + 0.004      * 0.0150
  3. $26.30 ignores the 3-month penalty for redemptions before five years. If this hypothetical bond were redeemed in April 2024, the proceeds would be only $26.08.
    26.08 = 25.86 * (1 + 0.0341 / 2) ^ (3 / 6)
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Aguilar
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Re: When does Treasury Direct announce new iBond rates?

Post by Aguilar »

Thanks for the thorough response. Now I understand how it works. I’ll wait till mid April to decide then.
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Re: When does Treasury Direct announce new iBond rates?

Post by peteyboy »

This article helps explain the value of the fixed rate portion of an I-bond.

https://tipswatch.com/2023/03/09/i-bond ... ate-reset/

In particular, the passage below from the article discusses the current scenario:

“ But even if the fixed rate rises on May 1, if the increase is small — say from 0.4% to 0.6% — an investor still might want to buy in April to lock in the 6.89% interest rate for a full six months. On a $10,000 investment, that equals $344.50 in interest. A 0.2% increase in the fixed rate only adds $20 a year.

It looks likely that the I Bond’s variable rate will fall on May 1. This is uncertain, with two months of inflation unreported, but the variable rate could fall to something like 3.50%. If the fixed rate rises to 0.6%, the new composite rate would be around 4.12%”
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Aguilar
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Buy iBonds now or in May? What does the March CPI tell us? I’m

Post by Aguilar »

Based on the March CPI, is it recommended to buy iBonds this month or wait till May?
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Re: When does Treasury Direct announce new iBond rates?

Post by Raspberry-503 »

There already is a thread with with answers/discussion.
Buying in April will return 6.68% (from memory, 6.48% variable + 0.4% fixed), buying in Maybe I'll be 3.38% variable +whatever fixed will be announced in May. Many people expect 0.4%-0.6% fixed, but there is no way to know for sure.

So if you are after short term return buy now
If you are in for the longer term you might get a slightly better fixed rate in May. Do you feel lucky?

I'm planning to buy 1/2 now and 1/2 later, cashing in a 0% fixed to buy a non-0% fixed in August or September

Of course the 6.48% is for the first 6 months then you'll get 6 months at 3.38% then the following 6 months at whenever variable rate they amount in Nov3, etc...
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