Tipswatch - Guessing I Bonds fixed rate, May 1, 2023

[Chuck]

I will begin with bonds from 11/2016 that have no penalty and a 0% fixed rate. In May the 6.48% rate will expire.

[impatientInv]

Thanks for posting the link, it was a good read.

Last year I did my own pattern matching or reading of tea leaves guessing how the fixed rates are set. One thing I think a lot of articles get wrong is that there is definitely a lag in the information the treasury has on real-rates when they make the decision versus when the new fixed is announced. A lag of 2 months is entirely possible, given the speed of government. Second, I think the look-back period could be even longer like 12 months instead of 6 in the article, based on how the fixed rate trails the change in real rate patterns. All in all they may be using averages over real rates going back 14 months or more (12 months look-back + 2 months lag).

Anyway those are just my observations by eye, but I been hoping to find some time to try to spreadsheet the data like tipswatch has done. I wonder if someone has already compiled the data into a spreadsheet?

For Guessing the fixed rate
1. I think look back should be only 6 months, because 10 year real rate is the forecast rate for the next 10 years. And the fixed rates are set every six months, so the look back should be 6 months IMO
2. I think they also consider the outlook of fed plan for rates - cutting, raising or keeping flat + recession outlook. For example during 2008-10, the real rate was much higher, but iBonds fixed rate was kept low due to recession and fed plan to keep rates at zero. In contrast during 2018-19 when outlook was for rasing rates + no recession, iBonds fixed rate was higher (fixed rate -0.35%)

1. Average rate over 6 months is >1.3%
2. Fed plans to raise rates or keep rates high with no planned cuts -- higher for longer.

So IMO iBond fixed rate will be >=0.8%, guess is 1.0%.

Below is from tipswatch

https://tipswatch.com/

[chem6022]

Last year I did my own pattern matching or reading of tea leaves guessing how the fixed rates are set. One thing I think a lot of articles get wrong is that there is definitely a lag in the information the treasury has on real-rates when they make the decision versus when the new fixed is announced. A lag of 2 months is entirely possible, given the speed of government. Second, I think the look-back period could be even longer like 12 months instead of 6 in the article, based on how the fixed rate trails the change in real rate patterns. All in all they may be using averages over real rates going back 14 months or more (12 months look-back + 2 months lag).

Anyway those are just my observations by eye, but I been hoping to find some time to try to spreadsheet the data like tipswatch has done. I wonder if someone has already compiled the data into a spreadsheet?

For Guessing the fixed rate
1. I think look back should be only 6 months, because 10 year real rate is the forecast rate for the next 10 years. And the fixed rates are set every six months, so the look back should be 6 months IMO
2. I think they also consider the outlook of fed plan for rates - cutting, raising or keeping flat + recession outlook. For example during 2008-10, the real rate was much higher, but iBonds fixed rate was kept low due to recession and fed plan to keep rates at zero. In contrast during 2018-19 when outlook was for rasing rates + no recession, iBonds fixed rate was higher (fixed rate -0.35%)

1. Average rate over 6 months is >1.3%
2. Fed plans to raise rates or keep rates high with no planned cuts -- higher for longer.

So IMO iBond fixed rate will be >=0.8%, guess is 1.0%.

Thanks for posting your thoughts and intuition! Meanwhile, I found some time to compile the data back to 2003 for both the TIPS real treasury yield curve and the fixed rates.

The compiled data definitely suggests there was traditionally a lot of treasurer's choice in the fixed rates in the distant past. For example it is hard to reconcile the 0.2% fixed rate starting in Nov 2013 with the 0.1% fixed rate in May 2014. Almost any reasonable slicing of the real yields suggests the later May 2014 fixed rate should have been higher than the fixed rate in Nov 2013. The biggest outlier though is May 2009, where the fixed rate of 0.1% is lower by an order of magnitude than most of the other data would suggest. May 2009 is on the heels of the great financial crisis and the introduction on quantitative easing, so that could match your thoughts on treasurer's choice changes due to circumstance.

However I think fixed rates may have become more systematic in the last ~7 years. Since November 2015 I can match the fixed rates using a reasonable set of parameters. They suggest your 6 month (126 trading days) guess is likely accurate for the look-back window over which to average the real rates. A good match for information lag was much shorter than I though at only 1 week (5 trading days). Somewhat surprisingly the 5-year real yields were a closer match than the 10-year yields. Finally, the ratio the fed uses between the average real rate and the new fixed rate appears to be around 65%. If you then round to the nearest 0.1% using those parameters then you can exactly predict the last 9 positive average real rates (where 1 rounded down to a 0.0% fixed rate) dating back to Nov 2015. The caveats would be that this is a small time period and they can likely add a treasurer's choice whenever they want going forward.

If were apply those right now as of 3/14/2023 it would predict a 1.0% fixed rate (0.99% before rounding). So that is my estimate if 5-year real rates stay near their 1.52% average over the next 5 weeks. That also seems to match your thoughts on the likely new fixed rate.

[QuiGonJohn]

So today, I got another notification that the interest rate on my AmEx HYS account is going up, from 3.44030% to 3.68158%. This is why I find it so odd that Treasury would again lower the inflation rate on iBonds. I'm not saying they won't do it, I'm saying it is not right and they should not be doing it. Along with the fact that TRUE inflation, has not eased, only the "tweaked" numbers that get released.

[GreendaleCC]

So today, I got another notification that the interest rate on my AmEx HYS account is going up, from 3.44030% to 3.68158%. This is why I find it so odd that Treasury would again lower the inflation rate on iBonds. I'm not saying they won't do it, I'm saying it is not right and they should not be doing it. Along with the fact that TRUE inflation, has not eased, only the "tweaked" numbers that get released.

If you do not believe in inflation as it's measured by the US government that determine I bonds' inflation rate, then I can appreciate why you might feel disgruntled over I bonds.

With that said, are you comparing the HYS rates offered by a for-profit entity -- which is competing for customers in the marketplace -- with savings bonds from the federal government? If you are, you might want to reconsider this.

[QuiGonJohn]

If you do not believe in inflation as it's measured by the US government that determine I bonds' inflation rate, then I can appreciate why you might feel disgruntled over I bonds.

With that said, are you comparing the HYS rates offered by a for-profit entity -- which is competing for customers in the marketplace -- with savings bonds from the federal government? If you are, you might want to reconsider this.

My point is almost all interest rates are rising. The FED official rate. Rates paid by myriads of banks (including my Am Ex HYS), rates charged by myriads of banks on credit cards, car loans, mortgages, etc. On ALL this stuff, EXCEPT iBonds. That just sounds too fishy to me. As if it's a conspiracy that the govt is saying, this is too good for people, so we have to finagle some way to pay much less. I guess,when I decided to get the iBonds, I knew it could go down in the rate, I get that. But I thought I didn't have to worry about it going down significantly until when/if, the FED started dropping rates like hot potatoes, like they did in the many years prior to 2022. And I did not think that was an unreasonable assumption.

[arsenal_fan]

If the overall rate were lower than say the ~5% T-Bills are offering but you had higher fixed rate component 0.7-0.8%, would you redeem a 0% fixed rate allocation and buy the 10k, or put another 10k in it??

[Tom_T]

If the overall rate were lower than say the ~5% T-Bills are offering but you had higher fixed rate component 0.7-0.8%, would you redeem a 0% fixed rate allocation and buy the 10k, or put another 10k in it??

Check out this discussion.

https://bogleheads.org/forum/viewtopic. ... 0#p7169270

[Tom_T]

If you do not believe in inflation as it's measured by the US government that determine I bonds' inflation rate, then I can appreciate why you might feel disgruntled over I bonds.

With that said, are you comparing the HYS rates offered by a for-profit entity -- which is competing for customers in the marketplace -- with savings bonds from the federal government? If you are, you might want to reconsider this.

My point is almost all interest rates are rising. The FED official rate. Rates paid by myriads of banks (including my Am Ex HYS), rates charged by myriads of banks on credit cards, car loans, mortgages, etc. On ALL this stuff, EXCEPT iBonds. That just sounds too fishy to me. As if it's a conspiracy that the govt is saying, this is too good for people, so we have to finagle some way to pay much less. I guess,when I decided to get the iBonds, I knew it could go down in the rate, I get that. But I thought I didn't have to worry about it going down significantly until when/if, the FED started dropping rates like hot potatoes, like they did in the many years prior to 2022. And I did not think that was an unreasonable assumption.

That was an incorrect assumption. It doesn't sound like you knew what you were buying nor how I Bonds work. Anyone here could have told you what to expect. It's not a government conspiracy.

[CC1E]

If you do not believe in inflation as it's measured by the US government that determine I bonds' inflation rate, then I can appreciate why you might feel disgruntled over I bonds.

With that said, are you comparing the HYS rates offered by a for-profit entity -- which is competing for customers in the marketplace -- with savings bonds from the federal government? If you are, you might want to reconsider this.

My point is almost all interest rates are rising. The FED official rate. Rates paid by myriads of banks (including my Am Ex HYS), rates charged by myriads of banks on credit cards, car loans, mortgages, etc. On ALL this stuff, EXCEPT iBonds. That just sounds too fishy to me. As if it's a conspiracy that the govt is saying, this is too good for people, so we have to finagle some way to pay much less. I guess,when I decided to get the iBonds, I knew it could go down in the rate, I get that. But I thought I didn't have to worry about it going down significantly until when/if, the FED started dropping rates like hot potatoes, like they did in the many years prior to 2022. And I did not think that was an unreasonable assumption.

I suggest you do a bit if research on how the I-Series Savings Bond fixed and variable interest rates are set. In short, the variable rate is set using a known formula, based off CPI. The fixed is whatever treasury feels like paying, but is unlikely to ever be very high (think 0-3%).

The good news is that you can cash them in after a year while paying a 3 month interest penalty. So just wait 3 months into the lower rates and cash them if you don’t like how they work.

[MrJedi]

I Bonds variable rate is based on CPI-U/inflation. That doesn't have anything to do with interest rates in the open market or the fed funds rate which has strong influence over short term interest rates. The only loose correlation is that the fed funds rate is a tool to try and lower inflation. Hence if anything, as fed funds rate goes up, the idea is for inflation to go down as a consequence. There is not a direct 1:1 correlation though.

[aristotelian]

My point is almost all interest rates are rising. The FED official rate. Rates paid by myriads of banks (including my Am Ex HYS), rates charged by myriads of banks on credit cards, car loans, mortgages, etc. On ALL this stuff, EXCEPT iBonds. That just sounds too fishy to me. As if it's a conspiracy that the govt is saying, this is too good for people, so we have to finagle some way to pay much less. I guess,when I decided to get the iBonds, I knew it could go down in the rate, I get that. But I thought I didn't have to worry about it going down significantly until when/if, the FED started dropping rates like hot potatoes, like they did in the many years prior to 2022. And I did not think that was an unreasonable assumption.

Why would you assume that inflation protected and nominal bonds would move together? I Bonds will outperform nominal bonds when inflation is high, nominal bonds will outperform when inflation is low. If they were supposed to move together there would be no need for one versus the other. The intended use case for I Bonds is to guarantee inflation protection. In exchange for that guarantee, you risk underperforming nominal rates.

There is no conspiracy. You can buy nominal bonds from the same people that are offering I Bonds. In that case, you risk being locked into your rate when inflation is higher than expected.

[geniekid]

If you do not believe in inflation as it's measured by the US government that determine I bonds' inflation rate, then I can appreciate why you might feel disgruntled over I bonds.

With that said, are you comparing the HYS rates offered by a for-profit entity -- which is competing for customers in the marketplace -- with savings bonds from the federal government? If you are, you might want to reconsider this.

My point is almost all interest rates are rising. The FED official rate. Rates paid by myriads of banks (including my Am Ex HYS), rates charged by myriads of banks on credit cards, car loans, mortgages, etc. On ALL this stuff, EXCEPT iBonds. That just sounds too fishy to me. As if it's a conspiracy that the govt is saying, this is too good for people, so we have to finagle some way to pay much less. I guess,when I decided to get the iBonds, I knew it could go down in the rate, I get that. But I thought I didn't have to worry about it going down significantly until when/if, the FED started dropping rates like hot potatoes, like they did in the many years prior to 2022. And I did not think that was an unreasonable assumption.

The FED is raising interest rates in order to lower inflation rates. The fixed rate of I-bonds is loosely correlated to interest rates. The variable rate of I-bonds is calculated based on inflation rates. November makes sense - the fixed rate went up, the variable rate went down. Yes it's too bad the overall composite rate was lower, but there's nothing unexpected going on.

[QuiGonJohn]

If anything, since when I bought iBonds (May 2022) the inflation rate went up high AND prior and after the FED was raising interest rates, that is probably how I got the idea that if interest rates are up, then the iBond rate would also be up. Sure 9+ for that period, then 6+ the next period. But in my mind, I did not see the rate dropping as low as people are prognosticating, unless the FED started lowering the rate. And yes, I did not know a whole lot about iBonds when I decided to buy into them. I just looked at my Am Ex HYS wasn't even paying 1%. And at the time I decided to move 20K to iBonds, basically with just that 20K, I was going to make as much interest each month as the other 180K I still had at AmEx was making. So it was more of a way to offset their paltry low rates. I doubt I'll pull out the 20K before 5 years, unless we get 0% Inflation Rate for a six month period.

[sandan]

I think the first prediction that needs to be made is the direction of the fixed rate.

Anyone have a better model than what Tipswatch is suggesting for this purpose? I appreciate how the author laid out a table, but solely being focused on the 10 year seems to be misleading. Looking at both the 5 & 10 year real helps inform some of the movements that aren't explained by Tipswatch's table. See how the direction of the 10yr yield does not reconcile with ibonds around .. Nov 2019, Nov 2008 etc.

5yr https://fred.stlouisfed.org/series/DFII5
10yr https://fred.stlouisfed.org/series/DFII10

I guess in May, I will see if any of this 6 or 12 month "averaging" business holds...

[coachd50]

I wonder if we are going to see a fairly rapid loss of interest in iBonds among investors newer to them that got in when they had a composite rate of 9.62% now that the new composite rate is looking more like something in the 3.5-4% range starting in May of 2023.

Why would 4% be terrible? You’re still getting ~7% right now for six months, so that would give you a blended average of 5.5% for the year. If the Fed is to be believed, interest rates may reach that level this summer, at which point half the year is already gone.

Plus, there’s already been a recent uptick in inflation, belying the claim that some made that inflation was over. Also, some now believe that rates can’t go as high because of the SV Bank mess. Who knows? But with I bonds, I can still defer taxes until I actually need the money. They still look pretty attractive to me.

Obviously I don't speak for everyone, but for me it is the combination of the decreasing composite rate with the low fixed rate. Purchasing I bonds when they were paying nearly 10% and anything with comparable default risk was paying much less was a fairly easy decision. Now, with composite rates near what T bills are paying-- a fixed rate of below 0.5% is far less attractive when making decisions on purchases. When looking at I bonds over their history, for bonds purchased in 2010 with a 0.30% fixed rate only 9 out of 27 6 month periods saw composite rates of above 2.75. That is 108 months of below 2.75% earnings.

I contend that now the decision has to be based on purpose. What is the purpose of the funds? For me, I think the store of value aspect makes them a good emergency fund, or savings mechanism for specific future purchases. For example, I might be in the market for an automobile in 5-7 years. So using inflation protected securities makes sense. If I want a car that costs about $30,000 now, then accumulating $30,000 in I bonds will help with inflated car prices in 7 years.

[nps]

If anything, since when I bought iBonds (May 2022) the inflation rate went up high AND prior and after the FED was raising interest rates, that is probably how I got the idea that if interest rates are up, then the iBond rate would also be up.

The inflation rate has been falling since June 2022, which is reflected in the current 6.48% I bond inflation rate and will be the reason that the next rate is even lower. What do you mean it "went up high" since May 2022?

[QuiGonJohn]

I meant when the iBond inflation rate went up high (to 9.62%)

[Tom_T]

I meant when the iBond inflation rate went up high (to 9.62%)

It's calculated by measuring the change in CPI six months apart. At that time, inflation had gone up a lot, thus the high rate. Last time, the six-month change was a little less, so the variable rate went down. Next month, it's likely that the six-month change will be under 4%. That is just how it works. If you want something that reflects nominal rates, you can buy a CD or a Treasury. I think most people familiar with I Bonds knew that the 9% rate was unusual, and many people decided to take advantage of it for the short term, knowing that the rate would drop later on.

It wasn't a problem when the I Bond was paying 9% and Treasuries were at 4%, was it? Did you think the government was being extra generous?

[FinancialDave]

I meant when the iBond inflation rate went up high (to 9.62%)

I think most people familiar with I Bonds knew that the 9% rate was unusual, and many people decided to take advantage of it for the short term, knowing that the rate would drop later on.

It wasn't a problem when the I Bond was paying 9% and Treasuries were at 4%, was it? Did you think the government was being extra generous?

The good news is you really didn't have to do anything to get the 9.62% other than have bought them at any time in the past and still own them. In fact, many of my previously bought I bonds are still earning 9.62% right now, since they were bought late in the cycle like Apr or Oct.

[an_asker]

+1 on the 50/50.

Another vote for 50/50. Planning half this month and another half in May. My approach to limiting anticipated regret.

Don't you mean 33%/33%/33%? There are three distinct buying periods in a year for I Bonds aren't there?

Maybe it depends if you mean calendar year, or I-bond year.

Ohhh I understand now

Because the limits are based on calendar year, I thought the 33% splits make more sense. But analyzing a bit more, they probably make less sense. Any logic gurus to vote on one vs the other?

[an_asker]

Well as you know the variable rate isn't something the Treasury decides based on market factors; it's just a calculation. So "they" didn't lower the rate. Now, you can argue with the calculation, but it's not like the fixed portion where they may be considering the environment to some extent in setting the rate, and have some flexibility.

Well if that's the case, then the numbers they are basing the calculations on are "fabricated" to tell a different story. Inflation is still bad. Just shopped, 16oz bottle of Kraft Salad Dressing, that was $2.52 before Jan 2021, now was $5.99. Many other items similar story.

Hmmm... and I was shocked that oil (equivalent size container) went from $3.5 to $7.00!!

[QuiGonJohn]

Hmmm... and I was shocked that oil (equivalent size container) went from $3.5 to $7.00!!

Right, and double the price, isn't that 100% inflation, not something low like 3 or 4 %?

[rockstar]

Good one. The big question for me is: what is the fixed rate going to be given where TIPS are at today? The article did a good job speculating.

[dan7800]

I am guessing .413

[kd2008]

It seems all indicators point to 0.4% fixed or higher starting May 1st. Small chance that it may be lower.

Inflation rate will be lower.

Given this, I am holding off buying - possibly till end of October.

A bit of gamble, eh? Yes. Short term rates of money market fund make up for it. At least that is my mental accounting and I am sticking with it.

[MrJedi]

It should be noted that the inflation/variable component of I bonds only looks back 6 months at a time (March and September readings). I do get the sense that inflation is slowing down compared to 2021-2022. Note that even if prices stay where they are at currently, that is actually considered 0% inflation. Comparing to prices 2+ years ago no longer is a valid reference point moving forward. The reference point is now September 2022. What are prices like now compared to September 2022?

[nps]

It should be noted that the inflation/variable component of I bonds only looks back 6 months at a time (March and September readings). I do get the sense that inflation is slowing down compared to 2021-2022. Note that even if prices stay where they are at currently, that is actually considered 0% inflation. Comparing to prices 2+ years ago no longer is a valid reference point moving forward. The reference point is now September 2022. What are prices like now compared to September 2022?

Inflation has been slowing. Prices as of February 2023 were 1.36 percent higher than September 2022 according to the BLS.

[QuiGonJohn]

Inflation has been slowing. Prices as of February 2023 were 1.36 percent higher than September 2022 according to the BLS.

And therein lies the rub, can those numbers be trusted. Methinks not.

[GreendaleCC]

Inflation has been slowing. Prices as of February 2023 were 1.36 percent higher than September 2022 according to the BLS.

And therein lies the rub, can those numbers be trusted. Methinks not.

It sounds like it's an easy decision for you to skip I bonds and TIPS. Case closed.

[Kinkajou82]

So if a long term investor takes the stance that they cannot reliably predict the I Bonds fixed rate, that makes the decision of buying 10k in January vs buying 5k each I Bond period essentially lump sum vs dollar cost averaging, right?

BUT if we believe in our ability to evaluate and act on data to predict the fixed rate before it's set, then the decision-making changes and we believe we can optimize when we buy and "time the market" so to speak, would that be correct?

[Kookaburra]

Long term buyer, I’m placing my bets on a 0.8% fixed and will be waiting until late October to buy.

[theac]

Long term buyer, I’m placing my bets on a 0.8% fixed and will be waiting until late October to buy.

I'm also in for the long term.
Since I have a trust account, I'm presently thinking of waiting till at least late April to see if I buy $10k then (to catch the present higher comp rate), and then, depending on if the fixed rate does go up on May 1st, would buy another $10k at the end of May.

Or, if the rate doesn't go up on May 1st, could just wait till Oct to decide on that second $10k.

And either way, if the fixed rate is looking good at the end of the year (and if the financial world is also looking good, i.e. the USA still exists, etc ), I could then make my first 2024 purchase at the end of Jan.

I'm still a little unsure which strategy I'll use, but by the end of April maybe it will become clearer to me. So depending on the situation a month from now, might not make my first purchase till the end of May.

And of course if someone doesn't have more than one TD account, but are planning something similar, they would simply do two $5k purchases in 2023.

[Tom_T]

I don't think the fixed rate is going up. TIPS real yields are much lower than they were a few months ago. We'll see! I have no room for more purchases until next year, anyway, so I'll be watching from the sidelines.

[impatientInv]

I don't think the fixed rate is going up. TIPS real yields are much lower than they were a few months ago. We'll see! I have no room for more purchases until next year, anyway, so I'll be watching from the sidelines.

I think they use the 6 months average of the TIPs rate to determine the fixed rate. That was <0.75% in November, for a fixed rate of 0.4%. Right now the average fixed rate >1.25%. So the estimate of fixed rate of 0.6%-1.0% of tipswatch is very reasonable. I would be surprised if the fixed rate is less than 0.8%.
https://www.cnbc.com/quotes/US10YTIP


Question about taxes. It is my understanding, that there is no need to pay taxes if the money goes towards educational expenses. If we sell old I Bonds to buy new I Bonds, are they subject to taxes?

[Mel Lindauer]

I don't think the fixed rate is going up. TIPS real yields are much lower than they were a few months ago. We'll see! I have no room for more purchases until next year, anyway, so I'll be watching from the sidelines.

I think they use the 6 months average of the TIPs rate to determine the fixed rate. That was <0.75% in November, for a fixed rate of 0.4%. Right now the average fixed rate >1.25%. So the estimate of fixed rate of 0.6%-1.0% of tipswatch is very reasonable. I would be surprised if the fixed rate is less than 0.8%.
https://www.cnbc.com/quotes/US10YTIP


Question about taxes. It is my understanding, that there is no need to pay taxes if the money goes towards educational expenses. If we sell old I Bonds to buy new I Bonds, are they subject to taxes?

Yes, I Bonds can be used tax-free for qualifying educational expenses if you're below the income limits.

And, yes, when you redeem old I Bonds to buy new I Bonds, the taxes are due.

[billthecat]

Another vote for 50/50. Planning half this month and another half in May. My approach to limiting anticipated regret.

Don't you mean 33%/33%/33%? There are three distinct buying periods in a year for I Bonds aren't there?

Maybe it depends if you mean calendar year, or I-bond year.

Ohhh I understand now

Because the limits are based on calendar year, I thought the 33% splits make more sense. But analyzing a bit more, they probably make less sense. Any logic gurus to vote on one vs the other?

I would say 25%/50%/25%, because that way each I bond period gets 50%, or $5K.

Of course, it gets more complicated if you add in the $5K refund. If we assume that gets done in period 1, then that would be 33% (of 15K) already. For the remaining 10K I would say 0%/75%/25%. The pattern (over the three periods during the year) then would be $5K/$7.5K/$2.5K, $5K/$7.5K/$2.5K,...which yields $7.5K per I bond period.

[JBTX]

The author speculates that the coming fixed rate may not be as high as originally anticipated due to recent banking events.

I bought a decent chunk of ibonds over the last couple of years between me, spouse, RLT and sole prop business and gift box. With variable rates and inflation trending down, and cash rates going up I probably won’t be adding to the positions, but what I may do is sell some of the zero percent fixed rates I’ve accumulated over the years and buy some at the higher fix rate. I’ll probably wait until later in the year to do that in case fixed rates rises, and also to cash out any purchases within 5 years to lose only 3 months at the new combined May lower rate.

[Tom_T]

The author speculates that the coming fixed rate may not be as high as originally anticipated due to recent banking events.

I bought a decent chunk of ibonds over the last couple of years between me, spouse, RLT and sole prop business and gift box. With variable rates and inflation trending down, and cash rates going up I probably won’t be adding to the positions, but what I may do is sell some of the zero percent fixed rates I’ve accumulated over the years and buy some at the higher fix rate. I’ll probably wait until later in the year to do that in case fixed rates rises, and also to cash out any purchases within 5 years to lose only 3 months at the new combined May lower rate.

I assume you didn't hit the $10K limit this year from either purchases or gift delivery?

[JBTX]

The author speculates that the coming fixed rate may not be as high as originally anticipated due to recent banking events.

I bought a decent chunk of ibonds over the last couple of years between me, spouse, RLT and sole prop business and gift box. With variable rates and inflation trending down, and cash rates going up I probably won’t be adding to the positions, but what I may do is sell some of the zero percent fixed rates I’ve accumulated over the years and buy some at the higher fix rate. I’ll probably wait until later in the year to do that in case fixed rates rises, and also to cash out any purchases within 5 years to lose only 3 months at the new combined May lower rate.

I assume you didn't hit the $10K limit this year from either purchases or gift delivery?

I’ll hit with gift delivery for myself and wife each. Will with 24 also.

But I can buy for self employment co and RLT. I could also put more in gift box.

[Morik]

As I read this thread it struck me that some posters (and readers) may have an incorrect model of what inflation is.

Prices of items don't go back down when inflation goes down--the prices just stop continuing to go up so quickly.
So an item that was $3 before the recent high inflation, and is now $8, expect it to stay at $8 (and keep rising over time) unless we hit deflation or the specific circumstances around that item change.

Inflation measures the rate at which prices are rising. If inflation fell to 0%, prices of items would stop increasing, but would not go back down to what they were before. And the ibond rate would go to 0%.

Also note that different types of items will have different inflation rates; if you have a specific item you want to buy in the future, there is no guarantee at all that ibonds or any other inflation linked investment will maintain purchasing power (before taxes) on that specific item.