By David Enna, Tipswatch.com
I’m traveling in Costa Rica for a couple weeks and I will often be in areas with weak or zero Internet connections. So I won’t be writing much and I may miss responding to some of your questions.
The holiday season is here but the news never stops. Fed Chairman Jerome Powell gave the stock and bond markets a boost Wednesday by suggesting that the December rate move by the Fed might be less aggressive. In other words, an increase of 50 basis points is coming. Just like everyone already knew. This was the Fed “signaling” the obvious. And of course the stock and bond markets are celebrating with a rally — stocks higher and bond yields lower.
On Dec. 13 at 8:30 a.m. EST the Bureau of Labor Statistics will release the November inflation report. I will be back at work that day, but I have no idea what to expect. The Cleveland Fed’s Inflation Nowcasting site is projecting an all-items increase of 0.47% for November and 7.49% year over year. But these Nowcasting predictions have been too high recently. We’ll see.
One day later, on Dec. 14, the Federal Reserve will announce its decision on the new federal funds rate. The obvious expectation is a 50-basis-point increase to a range of 4.25% to 4.50%. The Fed could be closing in on a “terminal” rate, but a lot will depend on future inflation reports and the status of the U.S. economy.
Then, a week later, on Dec. 22 at 1 p.m., the Treasury will close its auction of a reopening of CUSIP 91282CFR7, creating a 4-year, 10-month Treasury Inflation-Protected Security. This will be an interesting auction, coming a week after both the November inflation report and the Fed’s rate hike decision. Because this TIPS has a coupon rate of 1.625%, it’s possible it will be selling at a premium price. It is currently trading on the secondary market with a real yield of 1.29%, a stunning decline from the originating auction’s yield of 1.732% just six weeks ago. (And I’m just reminding everyone I called that October auction a unicorn — a rarely seen event. Looks like I might have been right.)
I will be posting a preview story on that TIPS auction on Sunday, Dec. 18, and posting the result on Dec. 22 after the auction closes.
Finally, on Jan. 1, 2023, the I Bond purchase calendar will reset and allow new purchases of up to $10,000 per person for that calendar year. Because the I Bond’s fixed rate is now 0.4% these savings bonds will remain attractive. I’ll be posting an I Bond buying guide for 2023 in early January.
Happy holidays and thanks for reading.
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Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear.Please stay on topic and avoid political tirades.
David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. The investments he discusses can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
Great job : thank you
Hi, I bought an I-bond Dec 1 2021 for $10,000 the rate just reset Dec 1 2022. it says my balance on this I-bond is $10,604 which using an I-bond calculator says it should be $10,856. Why is the Sept of 2022 balance of $10, 604 listed? Dont the current balances get posted when the rate resets and 1 year is up? -THX
If you bought in December 2021, then TreasuryDirect will not show interest for the last three months (this is the case until you have held the I Bond for 5 years). It is correct that your rate just reset to 6.48%, but the last three months of interest have all been at the 9.62% rate, and that interest is not yet shown.
That sounds about right, but doesn’t make much sense. Why not list your total balance as of this date. Then when you go to sell, in the bill of sale show the 3 mos interest subtraction? I guess its just how our govt does things. Thanks
I wrote an explainer a few months ago: https://tipswatch.com/2022/08/09/dont-go-ballistic-over-the-way-treasurydirect-reports-i-bond-interest/
Safe travels, enjoy Costa Rica
Have fun in Costa Rica and be careful!
Just wanted to pass a long a big thank you for your insight. I’ve learned a lot, and appreciate the heads up about upcoming auctions, etc.
Looking forward to your preview of the December TIPS Auction, I am slowly dipping my toe into them and still learning.
Have a great time. I’m going too, but for only eight days in January.
Enjoy your trip and thank you for all your information!