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Post by Admin/YBB on Jan 3, 2023 18:26:40 GMT -6
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
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Post by Admin/YBB on Jan 12, 2023 18:12:34 GMT -6
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). LINK12. 6-mo rolling changes in CPI, and that for Dec 2022 is only +0.16% (Jun-Dec). LINK2Of 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.
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Post by Admin/YBB on Jan 14, 2023 19:24:37 GMT -6
YBB comments on Twitter on Treasury Direct I-Bond calculations LINK1 LINK2YBB 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
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Post by Admin/YBB on Jan 15, 2023 10:39:32 GMT -6
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/SBCPricetreasurydirect.gov/savings-bonds/savings-bond-calculator/
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Post by Admin/YBB on Apr 12, 2023 6:39:14 GMT -6
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 LINKYBB 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
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Post by Admin/YBB on Apr 28, 2023 10:27:29 GMT -6
New I-Bond Rate 4.30%, 5/1/23Fixed/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 LINKYBB 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/
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Post by Admin/YBB on Oct 12, 2023 6:36:19 GMT -6
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
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Post by Admin/YBB on Oct 31, 2023 9:15:27 GMT -6
New I-Bond Rate, 11/1/23Annual 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/SBCPrice05/2020 $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
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Post by Admin/YBB on Apr 10, 2024 7:00:57 GMT -6
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.
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