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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Thursday’s 10-Year TIPS Reopening Looks Attractive, But …

Summary

  • The current trend indicates a real yield around 0.88%, which is attractive, at least based on auctions over the last seven years.
  • The problem? A 5-year TIPS is currently yielding 1 basis point higher than a 10-year. Why buy a longer-term with a lower yield?
  • The inflation breakeven rate is trending at 2.12%, still in the “neutral zone” and below current U.S. inflation of 2.7%.

Read my full analysis on SeekingAlpha.com

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August Inflation Rises 0.2%: What It Means For Social Security, TIPS, And I Bonds

Summary

  • August headline inflation came in below the consensus for the month and year. Core inflation was also below the consensus.
  • The current trend in CPI-W would place the 2019 Social Security cost-of-living increase in a range of 2.7% to 3.0%, with one month remaining for the calculation.
  • Non-seasonally adjusted inflation increased just 0.06% in August, after a 0.01% increase in July. What does this mean for TIPS and I Bonds?

Read my full analysis on SeekingAlpha.com

Also:

  1. I have updated my Tracking Inflation and I Bonds page with the new numbers.
  2. I have also updated my Social Security COLA page with an update on the 2018 calculation.
  3. And here are the updated October Inflation Indexes for all TIPS.

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