US Savings I-Bonds - Every 6 Months (May 1 & Nov 1)

[Admin/YBB]

Treasury Direct (TD) has redesigned its website and none of the TD links in this thread work anymore. I will try to replace them wherever possible, but some old links may just be gone. Some new links were also found.
treasurydirect.gov/

[Admin/YBB]

Alert: Treasury Direct FAQs say that Friday October 28, 2022 will be the last day for the current 9.62% rate. Beyond that, lower November 1 rate will apply. Imagine banks moving deadlines on debt/deposit offers like that by just posting FAQs and citing staff and systems inadequacies as reasons.

When do I need to complete my I Bond purchase to receive the 9.62% rate?

You must complete your purchase and receive a confirmation email by October 28, 2022, at 11:59:59 PM ET. I Bonds purchased by this deadline will have an October 1st issue date. You will receive the published rate for six months (i.e., October – March).

Due to high volumes, we cannot guarantee that your bond purchase will be completed before this deadline if your account or purchase requires additional customer support for issues such as identity verification.

What happens if my purchase is completed on October 29 or later?

Due to processing and payment settlement timeframes, bonds purchased in TreasuryDirect October 29 through October 31 will be issued in November. As a result, these bonds will receive the rate announced by Treasury on November 1. This rate will still be applied for the next six-months (i.e., November – April).

www.treasurydirect.gov/help-center/savings-bond-faqs/


Edit/Add, 10/28/22: Treasury Direct will be shutdown for maintenance all of Saturday (11/29/22) and Sunday (11/30/22) and won't be available. It will reopen on Monday. Twitter LINK

[Admin/YBB]

New I-Bond Rate 6.89%, 11/1/22

Fixed/base rate 0.40% (badly lags 5-yr TIPS rate of 1.60%)
Semiannual inflation 3.24%
Composite rate = [0.0040 + (2 x 0.0324) + (0.0040 x 0.0324)] = 6.89%
www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/

For previously bought I-Bonds, the new rates will be,
i.ibb.co/xX9rjFz/Screenshot-2022-11-01-13-34-41.png

[Admin/YBB]

I-Bond Composite Rate Chart, TWITTER LINK

A point is also made that new fixed/base rate of 0.40% is attractive; it was 0% from May 2020 to October 2022.

Chart Image  pbs.twimg.com/media/FgnAN7HXoAMeY-s?format=jpg&name=900x900



Source  money.yahoo.com/treasury-i-bond-rate-163920592.html?ncid=twitter_yfsocialtw_l1gbd0noiom

[Admin/YBB]

A visual chart of I-Bond Rate Components. Note that the I-Bond variable rate (for 6 months unadjusted CPI change between March-September-March) differs from the unadjusted semiannual CPI readings (H1, H2; last 2022/H1).
www.cnbc.com/2022/11/01/treasury-series-i-bond-rate-is-6point89percent-through-april-2023.html

Edit/Add: Twitter Comment

YBB Personal Finance
@ybb_Finance
Replying to @cnbc and @katedore

The unadjusted semiannual CPI shown is very lagging data - for H1, H2, the latest 2022/H1.

Image Screenshot  i.ibb.co/Fns4MqK/Screenshot-2022-11-06-06-37-35.png

[Admin/YBB]

2023 I-Bond Guide from TIPSwatch,  tipswatch.com/2023/01/03/i-bonds-a-not-so-simple-buying-guide-for-2023/

It's a good objective guide that compares I-Bonds with alternatives (CDs, TIPS).

IMO, the 5-yr TIPS held to maturity are better alternatives than I-Bonds in 2023. Those capture higher real-rates (1.65%, 1/3/23) + CPI. TIPS funds are affected by interest rates and duration (TIPS held in brokerage accounts also have fluctuations, but the idea is to hold them to maturity when they pay up with cumulative inflation adjustment).  VTIP TIP LTPZ $$CPI

[Admin/YBB]

Alert on I-Bonds, 1/12/23

Alarm bells are going on in the media that the I-Bond rate may collapse next time on 5/1/23. This is based on a running tracking of the variable inflation adjustment; the base/fixed amount is quite small. Note that I-Bond variable rates are based on 6-mo changes in the CPI (unadjusted) in March (May 1 announcement) and September (November 1 announcement).

There are 2 running projections for the variable rate component now that the December CPI (unadjusted) is out.

1. Summing the monthly changes for Oct-Mar, with 3 of the 6 months available now, the variable rate est is just 0.0% (Oct + Nov + Dec). LINK1

2. 6-mo rolling changes in CPI, and that for Dec 2022 is only +0.16% (Jun-Dec). LINK2

Of course, things may change with 3 more CPI reports (Jan, Feb, Mar) that are needed to have a definitive picture for the rate on 5/1/23. But if the current trend of lower inflation continues, the outlook isn't good.

Those holding I-Bonds for 12+ months may consider an exit strategy after 5/1/23 of selling with 3-mo interest penalty (small if I-Bond rate collapses).

Of course, the current I-Bond rate of 6.89% will apply to purchases until 4/28/23, the last business day of April (unless changed by Treasury Direct). The current rate will apply for 6 months from the purchase date; also the annual purchase limit applies.

[Admin/YBB]

YBB comments on Twitter on Treasury Direct I-Bond calculations

LINK1   LINK2

YBB Personal Finance
@ybb_Finance
(1/14/23    YBB)

I have seen some insurance companies do similar as the "secret formula" used by #TD. TD sets 6-mo rate & calculates (lower) monthly compounding rate. @iwasretired  @tipswatch
There would be outcry if banks did this. They set nominal rate & figure out (higher) effective rate.


YBB Personal Finance
@ybb_Finance
(1/14/23    YBB)
Replying to
@ybb_Finance

BTW, TD composite rate formula is an approx of (1 + x + y)^2 & why is that needed in this day? But Treasury does stuff the old way although headed by economist @secyellen.
ybbpersonalfinance.proboards.com/thread/209/savings-bonds-6-months-nov

[Admin/YBB]

TD I-Bond Interest Calculations in Formulas

To clarify, TD does semiannual compounding normally. But within the 6-mo, it treats the semiannual rate as an effective rate & calculates monthly interest credits accordingly (in reverse). This use of compounding by TD differs from that by banks: TD calculate (lower) nominal rates from effective rate (announced) for the period, while banks calculate (higher) effective rate from nominal rate (announced) for the period.

If c is the I-Bond composite rate (annual), m the number of integer multiples of 6-month periods,

then, the interest adjustment factor is (1 + c/2)^m, where m >= 1, but the composite rates rarely carryover beyond 1 full 6-month period,

and for a month within any 6-month period, the interest adjustment factor is (1 + c/2)^(1/6),

and for p months (=< 6), the interest adjustment factor is, cumulatively, (1 + c/2)^(p/6), where p = 1, 2,...,6.

Note that both formulas give the same result when m = 1 or p = 6.

To get a period-end value, multiply the period-start value by the interest adjustment factor.

Another quirk of TD I-Bond calculations is that they are all done for $25 initial purchase value, rounded to 2 decimal places, and then scaled to proper amounts. Strangely, the old Savings Bond Calculator doesn't even accept $25 value; valid denominations are $50, $100, $200, $500, $1,000.

To apply these formulas to a specific I-Bond purchase, generate a table of applicable composite rates, noting that the composite rates apply for 6-month periods starting from the purchase date; they are changed every 6 months to then composite rates.

One can just use the old Savings Bond Calculator for paper bonds. Keep in mind that it will accept only valid denominations for paper bonds and result will have to be scaled for other amounts.

treasurydirect.gov/BC/SBCPrice
treasurydirect.gov/savings-bonds/savings-bond-calculator/

[Admin/YBB]

New I-Bond Rate 3.79-4.40%, 5/1/23 (Estimated, 4/12/23)

Fixed rate 0.40-1.00%
Semiannual inflation 1.694% (Unadjusted CPI 6-mo change from Sep-Mar)
Composite rate = 3.79-4.40 %
(Current rate of 6.89% valid for purchases until 4/28/23)

Calculations:
With fixed/base 0.40%: 0.004 + 2 x 0.01694 + 0.004x0.01694 = 0.03794, or, 3.79%
With fixed/base 1.00%: 0.01 + 2x0.01694 + 0.01x0.01694 = 0.044049, or 4.40%

Edit/Add: Twitter LINK

YBB Personal Finance
@ybb_Finance (4/13/23   YBB)

6-mo changes to CPI (unadjusted) peaked (6.2801%) at July 2022 release, bottomed (0.1640%) at January 2023 release.
Why unadjusted? That is used for #IBonds, but only October and April releases matter for those.
fred.stlouisfed.org/graph/?g=12sFh

[Admin/YBB]

New I-Bond Rate 4.30%, 5/1/23

Fixed/base rate 0.90%
Semiannual inflation 1.69%
Composite rate = [0.0090 + (2 x 0.0169) + (0.0090 x 0.0169)] = 0.042951 or 4.30%
www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/

Edit/Add, 4/29/23. Twitter LINK
YBB Personal Finance
@ybb_Finance   (4/29/23   YBB)
Replying to
@tipswatch

Cutoff got moved to Thursday Midnight - buried under Help Center - Savings Bond FAQs.
"(When did I need to complete my I bond purchase to receive the initial rate of 6.89 percent?)
If you were buying in TreasuryDirect, you needed to complete your purchase and receive a confirmation e-mail by Thursday, April 27, 2023, at 11:59 p.m. Eastern Time."
treasurydirect.gov/help-center/savings-bond-faqs/

[Admin/YBB]

New I-Bond Variable Rate, 10/12/23

Semiannual inflation rate 1.9723%

Composite rate = b + 2f + bf, where b is the base/fixed rate (annual), f is the semiannual inflation rate.

Base/fixed rate should go up from 0.90% to 0.90-1.5% (compare with the current 5-yr TIPS rate of 2.39%)

So, the estimated I-Bond rate range for 11/1/23 is 4.86-5.47%.

The actual I-Bond rate will be posted on 11/1/23.

Edit/Add. Social Security COLA for 2024 will be +3.2%.

Edit/Add2. For many I-Bond holders, the decision may to hold or fold. If they bought last year, they have to wait at least 12 months, and then up to 5 years, there is 3 month interest penalty (Treasury Direct value shown is net of applicable penalty). It is better to sell them at 6 month intervals from the purchase date to make full use of current rates. Also, sell early in the month to still get whole month's interest (flip side is to buy late in the month, although most won't be buying).

Edit/Add3. Medicare premium for 2024 were also announced yesterday.
www.cms.gov/newsroom/fact-sheets/2024-medicare-parts-b-premiums-and-deductibles

[Admin/YBB]

New I-Bond Rate, 11/1/23

Annual base/fixed rate (b) 1.30%.
Semiannual inflation rate (f) 1.9723%
Composite rate = b + 2f + bf.
So, the I-Bond rate from 11/1/23 is 5.27%.
www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/

Edit/Add. Real 5-yr (#TIPS) is +2.40%, 10-yr +2.44%. So, #IBonds fixed rate of +1.30% is OK.
I-Bonds and TIPS account for inflation differently.
Nominal 5-yr is 4.80%, 10-yr 4.88%. New I-Bond rate beats both of those.

Edit/Add2. Using online Savings Bonds Calculator (for paper I-Bonds), values on rate change dates:
treasurydirect.gov/BC/SBCPrice

05/2020  $100.00
11/2020  $100.28
05/2021  $100.96
11/2021  $102.24
05/2022  $105.00
11/2022  $109.36
05/2023  $113.76
11/2023  $116.56

[Admin/YBB]

With the March CPI released today, the variable I-Bond rate on 5/1/24 should be 1.476 x 2 = 2.952%. (Semiannual unadjusted CPI change Sep-Mar)

However, Treasury rounds the semiannual change to 2 decimal places, so the new variable rate will be 1.48 x 2 = 2.96%.

The fixed/base rate will be announced on 4/30/24 or 5/1/24 only.

[Admin/YBB]

Early announcement on 4/30/24 for I-Bond rates 5/1/24 - 10/31/24.
Fixed/base rate 1.30% (same)
Variable rate (semiannual) 1.48%
Composite rate = [0.0130 + (2 x 0.0148) + (0.0130 x 0.0148)] = 4.28%

[Admin/YBB]

Starting January 1, 2025, you will no longer be able to buy paper Series I savings bonds with your tax refund.

What is the background?

The Tax Time Savings Bonds (TTSB) program was established in 2010 to give tax-filers, particularly low- and moderate-income individuals, the ability to buy paper Series I savings bonds using their tax refunds.

This program marked an exception in a decade of shifts to electronic developments for savings bonds. Series I bonds were first offered in TreasuryDirect in 2002; Series EE, in 2003; the option to buy paper savings bonds through payroll contributions ended for government employees in October 2010; in 2012, banks stopped selling paper savings bonds.

On average, 35,000 tax filers each year bought paper Series I bonds: this represented .03 percent of tax filers, and less than 10 percent of Series I bond purchasers.

Less than 10 percent of participants consistently participated (more than 2 years).

Sales of paper I bonds through this program made up less than 1 percent of all series I savings bond purchases.

Why can’t I use my tax refund to buy paper series I bonds anymore?

This option was costly and not frequently used. The mailing of physical savings bonds was also subject to fraud, theft, loss, and delays. Buying savings bonds online is simple, safe, and affordable.

Has the purchasing limit for series I bonds changed?

You may continue to purchase up to $10,000 of series I bonds in a calendar year.

www.treasurydirect.gov/research-center/faq-irs-tax-feature/

[Admin/YBB]

After the release of CPI & CPI-W on 10/20/24:

I-Bond variable-rate from November 1 is 1.90% (semiannual 0.9506%). Treasury will announce the new rate (fixed + variable) on 11/1/24 (10/31/24?),
www.treasurydirect.gov/savings-bonds/i-bonds/i-bonds-interest-rates/

Social Security COLA for 2025 is +2.5%. It's based on the change in Q3 average of CPI-W yoy. The salary-cap increased by higher wage inflation of +4.45%.
blog.ssa.gov/social-security-announces-2-5-percent-benefit-increase-for-2025/
www.ssa.gov/oact/cola/AWI.html

[Admin/YBB]

US Savings I-Bonds Rate, 11/1/24 – 4/30/25
Total 3.11%% (vs current 4.28%)
Fixed rate is 1.20%, the semiannual inflation is 0.9506%.
www.treasurydirect.gov/savings-bonds/i-bonds/

Those thinking of selling I-Bonds should keep in mind the following:

1. There is a 3-month interest penalty for selling in years 1-5. If rates are good, just wait for 5 years.

2. Interest accrues monthly on the 1st of the month but is added to the principal only at 6-monthly intervals from the purchase date. So, simple interest applies from the month of purchase up to 6 months, & then is compounded (i.e. added to the principal) at 6-monthly intervals.

3. Buy late in the month, or sell early in the month, to get full month interest.

4. So, if the rates are bad, wait for the new lower rate to kink in, wait 3 more months, & then sell on/after 1st of the month. This will mean that the interest penalty will apply at the lower rate. The saving in penalty may be significant for large amounts.

Example 1. Purchase on/after May 1 (prefer late). The new rate will apply on November 1. Wait November, December, January. Sell on/after Feb 1 (prefer early).

Example 2. Purchase on/after July 1 (prefer late). The new rate will apply on January 1. Wait January, February, March. Sell on/after April 1 (prefer early).