I bond rate November 2019

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sophie
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I bond rate November 2019

Post by sophie » Fri Nov 01, 2019 1:55 pm

The fixed rate is reduced to 0.2%, from the previous 0.5%.

The inflation rate is 2.02%, so new bonds would pay a total of 2.22%. The 0.5% variety will (eventually) pay 2.52%...nice!

If you haven't bought I bonds in 2019 I expect you aren't going to, since we all kinda knew the fixed rate would go down. But if you DID, then what do you plan to do in 2020? I expect I will wait and see what happens to treasury yields before the May 1 reset, but otherwise I'd still buy at this fixed rate.
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ochotona
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Re: I bond rate November 2019

Post by ochotona » Fri Nov 01, 2019 2:02 pm

sophie wrote:
Fri Nov 01, 2019 1:55 pm
The fixed rate is reduced to 0.2%, from the previous 0.5%.

The inflation rate is 2.02%, so new bonds would pay a total of 2.22%. The 0.5% variety will (eventually) pay 2.52%...nice!

If you haven't bought I bonds in 2019 I expect you aren't going to, since we all kinda knew the fixed rate would go down. But if you DID, then what do you plan to do in 2020? I expect I will wait and see what happens to treasury yields before the May 1 reset, but otherwise I'd still buy at this fixed rate.

If the Fed keeps cutting rates from here on into April 2020, I'd be a buyer of my full $10,000 before May 1, 2020.
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Re: I bond rate November 2019

Post by dualstow » Fri Nov 01, 2019 2:06 pm

sophie wrote:
Fri Nov 01, 2019 1:55 pm
The inflation rate is 2.02%, so new bonds would pay a total of 2.22%. The 0.5% variety will (eventually) pay 2.52%...nice!
Isn’t it 1.7%?
https://www.usinflationcalculator.com/i ... ion-rates/
RIP Marcello Gandini
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Re: I bond rate November 2019

Post by ochotona » Fri Nov 01, 2019 6:14 pm

Still thinking I may buy some EEs. Not many, I'm too old.
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Re: I bond rate November 2019

Post by jhogue » Mon Nov 04, 2019 1:04 pm

If the Treasury yield curve holds steady, I expect to buy my 2020 I bonds on 1 January or immediately thereafter. The sag in the middle of the yield curve has been warning of lower interest rates since Dec. 2018, so I see no compelling reason to wait for the May 1 2020 reset.

While the 11/01/19 reduction of the I-bond fixed component was widely anticipated, it was not reduced all the way to 0%. This was clearly a gift by Treasury to retail investors. The new combined I bond rate (2.22%) will beat every Treasury-issued security out to a 20 year Treasury note—even before taking 30 years of federal tax deferral and inflation adjustments into account.

For the present and near term future, I bonds still represent a free lunch courtesy of the US Treasury. They won’t make you rich, but they won’t make you sorry you bought them either.
“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 November 2019

Post by ochotona » Sun Jan 05, 2020 5:19 pm

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sophie
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Re: I bond rate November 2019

Post by sophie » Mon Jan 06, 2020 8:47 am

Thanks ochotona, for the reminder that it's I Bond time!

I must say I did lose interest in this article after the author said to wait until April 10 to make a decision because "a lot can happen in 12 months". If he's that math-challenged I don't exactly want to be taking advice from him.

Based on the current values of 5 year nominal & TIPS bonds and the inflation rate creeping up only slightly since November, I would be extremely surprised if the I bond fixed rate went up in April, and October is looking doubtful as well.

So I'm inclined to buy at the end of this month, enjoy the solid interest rate and deferred tax, and not wait until April. What's everyone else doing?
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Re: I bond rate November 2019

Post by ochotona » Mon Jan 06, 2020 9:22 am

Wait until April
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Re: I bond rate November 2019

Post by jhogue » Mon Jan 06, 2020 9:56 am

I will be buying my annual allotment of I-bonds at the end of January and paper I-bonds with my 2019 tax return shortly after that.

The current I-bond yield is 2.22%, easily beating the 1 year T-bill (1.60%) and the 10 year note (1.78%). I see little or no prospect of higher fixed or variable rates on 1 April 2020.

Tipswatch usually gives excellent advice on buying I-bonds. Not this time.
“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 November 2019

Post by ochotona » Mon Jan 06, 2020 10:20 am

Since you put it that way, "The current I-bond yield is 2.22%," it's fine to go now
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Re: I bond rate November 2019

Post by Kbg » Mon Jan 06, 2020 9:07 pm

What strategies are folks using to decide (that aren't simply trying to predict the future) between normal Ts and I-bonds.
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Re: I bond rate November 2019

Post by boglerdude » Mon Jan 06, 2020 11:36 pm

iBonds are cash.
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Re: I bond rate November 2019

Post by jhogue » Tue Jan 07, 2020 3:05 pm

Kbg wrote:
Mon Jan 06, 2020 9:07 pm
What strategies are folks using to decide (that aren't simply trying to predict the future) between normal Ts and I-bonds.
: If you are just starting, don’t buy STTs or savings bonds until your TMMF covers 6 months living expenses. After that, add STTs and savings bonds in equal amounts. When Cash reaches 2 years living expenses, put all new money in your savings bond ladder. I-bonds really hit their stride in the 5-30 year time frame after they become penalty-free, as well as inflation-adjusted and tax-deferred. The older they get, the more important these last two features become.
“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 November 2019

Post by ochotona » Tue Jan 07, 2020 3:18 pm

jhogue wrote:
Tue Jan 07, 2020 3:05 pm
Kbg wrote:
Mon Jan 06, 2020 9:07 pm
What strategies are folks using to decide (that aren't simply trying to predict the future) between normal Ts and I-bonds.
: If you are just starting, don’t buy STTs or savings bonds until your TMMF covers 6 months living expenses. After that, add STTs and savings bonds in equal amounts. When Cash reaches 2 years living expenses, put all new money in your savings bond ladder. I-bonds really hit their stride in the 5-30 year time frame after they become penalty-free, as well as inflation-adjusted and tax-deferred. The older they get, the more important these last two features become.
But you need to eat them at 30 years, as no more interest accrues
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Re: I bond rate November 2019

Post by Kbg » Tue Jan 07, 2020 3:35 pm

I have both, but other than calculating post tax equivalent rates I don't have a good plan and I tend to ETFs as I like the convenience/instant liquidity aspect. I'm just beginning to get my head around post career retirement planning and it appears to be highly temporal in nature (i.e. what is best is based on how various milestones and needs flow through time more than anything)
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Re: I bond rate November 2019

Post by vnatale » Thu Apr 16, 2020 7:07 pm

What did everyone end up doing? Who has already purchased up to their limit for 2020 I Bond purchases?

It seems that buying them by May 1, 2020 is advised?

Plenty of time to do the $10,000 via Treasury Direct? But what would be the deadline to get your tax return submitted so as purchase the other $5,000 limit and to take advantage of the prevailing rates prior to them changing (most likely decreasing?) on May 1, 2020?

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 November 2019

Post by jhogue » Thu Apr 16, 2020 7:40 pm

I purchased my full annual allotment of electronic I-bonds the day before yesterday.

I have not yet filed my 2019 federal tax return due to the delay of some additional forms. I will still purchase my full allotment of paper I-bonds regardless of whether the order is filled before or after 1 May 2020.

The higher rate would be nice to have (especially the 30 year fixed rate of +0.20), but my long range plan to acquire as many rungs in my I-bond ladder as possible remains intact.

Go ahead and buy, Vinny. I don't think you will be disappointed. If you are, you can always redeem them in a year and probably still earn as much or more as you would in a 1 year CD.
“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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