I-bond Rate May 2020

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ochotona
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Re: I-bond Rate May 2020

Post by ochotona » Fri May 01, 2020 4:58 pm

Everyone

Sign up for email alerts at https://tipswatch.com/

That way you will know well in advance about rate changes and deadlines
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jhogue
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Re: I-bond Rate May 2020

Post by jhogue » Sat May 02, 2020 7:21 am

+1

tipswatch is a great source of information on TIPS and US savings bonds. David Enna, the author, has been tracking them for years and is a reliable source of information on interest rate re-sets, for I-bonds especially.

I do not, however, agree with his advocacy of TIPS, which are inferior to I-bonds in their tax treatment, and also can go negative in deflationary economic environments (like right now). I-bonds are guaranteed to return 100% of invested principal, which gives them protection against deflation as well as inflation.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: I-bond Rate May 2020

Post by sophie » Sat May 02, 2020 10:00 am

jhogue wrote:
Fri May 01, 2020 9:40 am
As expected, the U.S. Treasury announced this morning that the I-bond fixed rate will be 0.00% from 1 May until 1 Nov. 2020. In addition to the variable rate, already announced as 1.06%, the composite rate of I-bonds purchased over the next 6 months will be 1.06%. While this rate will not set the world on fire, it should be noted that this new (and lower) I-bond rate still handily beats the current 1 year T-bill yield of 0.14%, commonly used in Treasury money market funds portfolios and popular with PP investors as well as legions of bogleheads suddenly rushing into safer and more liquid Treasury-issued securities.
https://www.treasurydirect.gov/news/pre ... di0520.htm
Yep, the CPI in March fell solely because of lower energy costs. I would guess the energy cost drop is a one-trick pony, since they can't drop much further even if oil prices continue to fall into negative territory. Consumer prices rose 1.5% and I expect this rise will be higher next month. We might see a deflation down the line, but my guess is that we will see a stagflation. Like the 1970s.
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ochotona
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Re: I-bond Rate May 2020

Post by ochotona » Sat May 02, 2020 3:24 pm

Like the 70s except the music was way better then
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Re: I-bond Rate May 2020

Post by vnatale » Sat May 02, 2020 5:59 pm

ochotona wrote:
Sat May 02, 2020 3:24 pm
Like the 70s except the music was way better then
As long as we ignore the "disco" aspect of music back then!

I loved the sticker I once saw a musician's amplifier: "Help Stamp Out Disco In Our Lifetime".

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: I-bond Rate May 2020

Post by jhogue » Sun May 03, 2020 10:32 am

sophie wrote:
Sat May 02, 2020 10:00 am
jhogue wrote:
Fri May 01, 2020 9:40 am
As expected, the U.S. Treasury announced this morning that the I-bond fixed rate will be 0.00% from 1 May until 1 Nov. 2020. In addition to the variable rate, already announced as 1.06%, the composite rate of I-bonds purchased over the next 6 months will be 1.06%. While this rate will not set the world on fire, it should be noted that this new (and lower) I-bond rate still handily beats the current 1 year T-bill yield of 0.14%, commonly used in Treasury money market funds portfolios and popular with PP investors as well as legions of bogleheads suddenly rushing into safer and more liquid Treasury-issued securities.
https://www.treasurydirect.gov/news/pre ... di0520.htm
Yep, the CPI in March fell solely because of lower energy costs. I would guess the energy cost drop is a one-trick pony, since they can't drop much further even if oil prices continue to fall into negative territory. Consumer prices rose 1.5% and I expect this rise will be higher next month. We might see a deflation down the line, but my guess is that we will see a stagflation. Like the 1970s.
It is times like these that make me really glad to have discovered the Permanent Portfolio.

I really have no idea whether we are headed into long term inflation or deflation. I am pretty sure no one else does either. Who could have imagined that oil could sell for -$25 per barrel? Carl Icahn bought some of those futures to fill up his refinery, but even he said that it was a bizarre and non-repeatable event because oil producers had learned to cap their wells next time rather than be forced to pay to get rid of the stuff.

At exactly the same time that oil took an unprecedented negative turn, major disruptions in packing plants and logistical chains have sent meat at the grocery prices rocketing upward. Should we call it inflation-- or something else? A repeat of 1970s-like stagflation?? While I just bought a just bought a chunk of I-bonds based upon my understanding of where government-generated CPI-U is headed in the short term, there is so much demand destruction and supply destruction churning the markets that I think it is simply impossible to know where the economy is heading. Market agnosticism is the only rational strategy right now.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: I-bond Rate May 2020

Post by pmward » Sun May 03, 2020 1:19 pm

jhogue wrote:
Sun May 03, 2020 10:32 am
I really have no idea whether we are headed into long term inflation or deflation. I am pretty sure no one else does either. Who could have imagined that oil could sell for -$25 per barrel? Carl Icahn bought some of those futures to fill up his refinery, but even he said that it was a bizarre and non-repeatable event because oil producers had learned to cap their wells next time rather than be forced to pay to get rid of the stuff.
Icahn's point there is wrong (maybe intentionally so, as a pump and dump)... or at the very least out of context. The oil producers lost no money on the May futures contract going negative. They sold those futures contracts months or even years ago for much higher. Producers do not sell front month contracts. It is only the paper traders that lost money on the May contract. I mean the people accepting delivery could have bought cheaper if they waited to the last day, but they still did not take a loss. The oil producers have 0 motivation to decrease production or "cap their wells" until the prices in the contracts months and years down the line where they actually do their selling go down. They've already sold all their oil production for the next months to years. Those futures contracts are out there, someone is already contractually obligated to take delivery whether there is storage space for it or not, and as such they have already locked in their profit. So far, the latter parts of the curve are holding up, so producers are still selling for a profitable price. Oil producers have 0 motivation to slow production at the moment because of this. This is precisely what makes this so dangerous. As long as they can sell their late month futures contracts at a profit, they are unaffected by the crisis, and in essence adding fuel to the fire, pun intended.
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Re: I-bond Rate May 2020

Post by jhogue » Mon May 04, 2020 7:58 am

pmward,

I re-read your post several times and still do not understand it.

I am still not sure whether we are headed for inflation or deflation? Are you?
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: I-bond Rate May 2020

Post by pmward » Mon May 04, 2020 11:57 am

jhogue wrote:
Mon May 04, 2020 7:58 am
pmward,

I re-read your post several times and still do not understand it.

I am still not sure whether we are headed for inflation or deflation? Are you?
It's clear we are in a deflation at the moment. My main point above is that oil producers are likely to make that deflation worse in the near term because they have no consequence yet to motivate them to curb production. Are we going to have inflation after? It depends. We need to generate enough "inflation" to counter the deflation and bring the system back to homeostasis. We are in a pretty severe deflation right now, so it requires pretty severe measures. The question to ask, are they going to provide just enough, like they did in 08/09, to counter the deflation but not spark inflation? Or are they going to overdo it? Only time will tell. I don't think anybody can say for certain right now whether the actions they are taking are enough, not enough, or more than enough. I don't think anyone can truly even understand the scope of the crisis until after it's all said and done.
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ochotona
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Re: I-bond Rate May 2020

Post by ochotona » Mon May 11, 2020 9:14 am

So when the I-bond fixed rate is stuck at 0%, then the strategy is just buy in future periods in that calendar year because, hey it might go up?

Jan 1 - Apr 30, May 1 - Oct 31, Nov 1 - Dec 31 are the three periods.
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