Great News For I Bond Investors: Treasury Raises Fixed Rate To 0.50%

Summary

  • I Bonds purchased from November through April will carry a composite rate of 2.83%, based on a fixed rate of 0.50% and inflation rate of 2.32%.
  • The fixed rate of 0.50% is the highest in 10 years, and means the return on I Bonds is likely to at least match inflation, even after federal income taxes.
  • The Treasury held firm on the 0.1% fixed rate for EE Bonds, but also retained terms that double their value in 20 years, for an effective interest rate of 3.5%.

Today’s announcement is very good news for I Bond investors, even for those who have already purchased their allocation for 2018. (The Treasury limits purchases to $10,000 per person per year.) But that clock restarts on January 1, so all investors will have access to the 0.50% fixed rate through April.

Read my full analysis on SeekingAlpha.com

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30-Year TIPS Reopening Auctions With A Real Yield Of 1.235%

Summary

  • The after-inflation yield of 1.235% was higher than where this TIPS was trading in the secondary market. That indicates weak demand.
  • The yield was the highest for any 29- to 30-year TIPS auction since February 2014.
  • The inflation breakeven rate came in at 2.13%, in line with recent auctions of this term.

Read my full analysis on SeekingAlpha.com

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I Bond Investors: Higher Fixed Rate Could Be Coming

Summary

  • The I Bond’s inflation-adjusted rate will rise slightly on November 1, so there is no pressure to buy before then.
  • But could the I Bond’s fixed rate fall from its current 0.3%? The data suggest zero chance, but the Treasury is unpredictable.
  • In fact, the data clearly support an increase in the fixed rate to 0.4% and possibly even 0.5%.

Read my full analysis on SeekingAlpha.com

I Bonds and TIPS

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30-Year TIPS Auction: Still Looks Too Risky

Summary

  • With a few days to go to Thursday’s auction, this TIPS is trading on the secondary market with a real yield of 1.19%, a two-year high.
  • Investors will get this TIPS at a discount, because the after-inflation yield will be higher than the coupon rate of 1.0%.
  • Buyers beware: Any 30-year Treasury will be a very volatile investment, especially in a time of rising interest rates and rising federal deficits.

Read my full analysis on SeekingAlpha.com

30-year TIPS auctions

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Inflation Report Sets Social Security COLA At 2.8%, I Bond Variable Rate At 2.32%

Summary

  • September inflation rose 0.1%, under the consensus estimate. Annual inflation fell to 2.3%, also under estimates.
  • Today’s inflation report means the Social Security COLA will increase 2.8% for 2019, the highest increase since 2012.
  • The data also set the I Bond’s inflation-adjusted variable rate at 2.32%, slightly higher than the current 2.22%.

Read my full analysis on SeekingAlpha.com

Also, I have updated my Tracking Inflation and I Bonds page with the new numbers.

And view my Social Security COLA page for these updated numbers.

And here the new November Inflation Indexes for all TIPS.

 

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CD Rates Are Rising, But Treasurys Are Still The Better Investment

Summary

  • Bank CD rates are finally climbing toward reasonable levels. How long has it been since we have seen 3% for a 3-year term?
  • But across most short-term maturities, U.S. Treasurys offer better yields, ultimate safety and freedom from state income taxes.
  • Bond funds are taking a hit as rates rise. Investing in U.S. Treasurys with a buy-and-hold strategy is a safer way to respond to rising risk.

Read my full analysis on SeekingAlpha.com

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10-Year TIPS Reopening Generates Attractive Real Yield Of 0.910%

Summary

  • The real yield of 0.910% was the second highest of this term through 43 auctions since May 2011.
  • The inflation breakeven rate came in at 2.15%, on the higher end of recent auctions, but still acceptably in the “neutral zone.”
  • Investors got an attractive yield, a good coupon rate of 0.750%, and a decent price versus nominal Treasurys.

Real my full analysis on SeekingAlpha.com

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