I bond frenzy

agree. i got all excited when i first learned about them, felt it must be wrong somehow.

then i discovered the 10k max, almost pointless.

what is nice for us seniors living on interest is the current t bill rates, and the hope of increasing interest rates in the near future.

 

Back 16 to 25 years ago, my wife went back to work and with my 401

 

Did she leave it there, or bring it back again?

 

Fatfingered.

Back 16 to 25 years ago my wife went back to work. With my 401K/IRA entirely in stocks and being in our late fifties at the time we decided to buy two I bonds every payday, one in my name and one in hers. I don't recall there being a yearly limit back then. My recollection is the rates were in the 2 to 4% range for the fixed portion. Sure beats the heck out of the short term bond funds.

Back in the day, you got mailed a physical bond. Now cashing them is a true PITA. And there is a limit to how long they will accrue interest.

I'd love to put them online so they would feed nicely into my monthly update to our net worth spreadsheet but that means trusting some delivery service to get them to the US treasury. For the first 10 years there was a Windows executable the USTS had that allowed you to update their values monthly but they discontinued it and now the only way to hold and calculate the bonds values is online.

 

So much easier than running to the fed all the time

 

Well, etter than just FAT!

You can go online and convert the paper bonds to an online account by entering the serial numbers...somehow.
You can still go online and get the value of any bond based on its date of issue

Mike

 

showing my age, we used to get 6-8% on t bills.

another 3/4% today from the fed, i'm all fired up!

 

Were many folks expecting the Treasury to bump up the fixed portion from the recently common 0.00% ? If not, then the old deal was a good bet.

If inflation returns to near zero as we had for a long time, Alice who bought last Friday (I'm not sure Monday's purchases could be processed in time to get the old rate) will be ahead of Bob for about 12 years. For people with money parked in CDs of shorter terms than that, and not intending to use longer terms, then last week's deal should have been better than this week's offer. Only folks planning to hold these bonds longer than about a dozen years will benefit from the wait.

If inflation at intended redemption time is as volatile as now, then the wait might become beneficial sooner.

If Alice and Bob are a couple, that is $20,000 per year between them. If they are giving to their kids and grandkids, that adds up even more.

If only I had bought up to the limit ...

Though did get several batches of the fixed portion at 3.00% and higher.

Apparently there was a serious spate of savings bond fraud, so many or most banks have ceased redeeming them. I put my paper bonds in a TreasuryDirect account last year. Then had serious problems buying any more because I had closed the only checking account linked to it after unfavorable mergers & acquisitions activity, and forgot that it was the only one tied to TD. TD wouldn't let me delete the dead account and link new accounts from online because, due to that fraud wave, they had raised the verification level to signature guarantees and official stamps above the level that my credit union and bank could or would provide. And a brokerage would not provide such verification for a banking transaction unrelated to their own business. This was finally resolved with a lot of hassle combined with multiple appeals to their alternate suggestions.

Those delays caused me to miss out on the previous 7.12% offering, and on our allowance for 2021.

30 years isn't a harsh limit. I believe this applies to most other savings bond series too.

Besides keeping photocopies, I used USPS certified mail, but also registered the bonds online prior to sending them in. Hopefully that should have made it even harder for identity thieves to steal and hack them.

 

In the website overloads and crashes I've seen elsewhere, each page load brings another crash or delay opportunity. Savings bond purchases for family members at TD would take multiple page loads per person, so would-be customers may have to go through this ordeal many times if trying to do it during high demand periods. But others trying at odd or low demand hours, or just after new processing capacity is added (the article I read mentioned that capacity was more than doubled) may have few or no such problems.

Also a minor nit for those making bets or forecasts on this back in October: I posted a guesstimated new rate of 6.47%, then found numerous others had previously posted their own guesses of 6.47 or 6.48% for the variable portion, undoubtedly from the very same official CPI data. For those of us who were also guessing that the fixed portion would remain unchanged at 0.00%, then the (almost) present value difference for the old vs new rate (presuming / hoping-for greatly reduced inflation by redemption time), for a $10k bond purchase, was $157.

This is (only) a bit more than the $136 mentioned above. But when making a buy-now-vs-later decision, one has to make a decision based on a forecast or a bet, not from knowing the actual new rate. As best I understand, Treasury does not announce the new rate until after it is too late to buy at the old rate.

 

What will be the new I-bond rate on May 1?

The latest monthly report, issued today, shows that inflation continues to fall. So should the next semi-annual I-bond rate. Inflation over the past 12 months was 5.0%. But most of that was in the nasty 2nd Quarter of last year. 3rd and 4th Quarter plus 1st Quarter this year combine to less than half of that.

If I'm using the right inflation tables, today's data suggests that the variable portion of the new rate, based on the most recent six months of inflation data, will be 3.38 or 3.39%, well down from the 6.48% of that component in the current cycle ending in a couple weeks.

The current I-bond rate also has a fixed rate component 0.40%, for a total stated rate of 6.49%. I don't have any guess for the new fixed component. If it doesn't change from today, that would out the total rate (combined variable and fixed portions) to 3.79 or 3.80%.

 

Our plain ol' online savings provider bumped the 'regular' savings up to just 0.80%. To get better, we had to switch to their newest latest and greatest account to get a decent rate. They have done this before, leave the old accounts at low rates and require active customer intervention to keep up with competitive rates. Keep paying unwary hands-off customers lousy rates. This seems to be a common industry practice, in fact it is how we left previous providers who were once great, then turned lousy in changing markets. Not once, but several times.

The financial houses holding our IRAs and brokerage account have been far better. Cash settlement accounts there automatically rose to 4.2-4.3% at one, 4.3-4.6% at the other, for the past couple months. Without any customer intervention.

I'm not sure such a downgrade would hurt them any more than the collateral damage that will also spill over to their direct competitors. But they probably do need to add a bit higher premium to attract the funds they need out of other markets.

 

Typo, too late to edit. The current I-bond offering rate, ending in a couple weeks, is 6.89%.

Again, for I-bond novices, that rate is paid for six months, until the new variable rate is applied. Repeat with a new variable rate every six months.