Buy in April to lock in the 1.2% fixed rate? Or buy in May to start with a higher composite rate?
April 30 update: I Bond gets a new fixed rate of 1.10%, composite rate of 3.98%
By David Enna, Tipswatch.com
Long-time investors in U.S. Series I Savings Bonds know there are a few weeks a year when conditions are ideal for making a decision: Purchase now or purchase later?
With Thursday’s release of the March 2025 inflation report, we have entered one of these “buying seasons,” which will continue through the end of April. But before we get to the details, let’s look at some basics of this investment:
An I Bond is a Treasury security that earns interest based on combining a fixed rate and an inflation-adjusted rate.
- The inflation-adjusted rate (often called the variable rate) changes each six months to reflect the running rate of inflation. That annualized rate is currently set at 1.90% and will increase to 2.86% after May 1. All I Bonds will eventually get the 2.86% variable rate, with the start date depending on the original month of purchase.
- The fixed rate will never change. So if you bought an I Bond in 2014 with a fixed rate of 0.2%, it will continue to have a 0.2% fixed rate for the life of the bond. Purchases through April 29, 2025, have a permanent fixed rate of 1.2%.
- The composite rate is a combination of these two rates, currently 3.11% annualized for a full six months for any bond purchased through April 2025.
The variable rate
Here is where we have certainty. The March CPI report provided the final number needed to set the I Bond’s new variable rate. Inflation ran at 1.43% from October 2024 to March 2025. Double that number and you get the new variable rate, 2.86%, up from the current 1.90%.
The new variable rate, 2.86%, is a big jump from the current rate of 1.90%. It makes an I Bond purchase in May more attractive, but remember that the variable rate changes every six months. All I Bonds, including those purchased in April, will get this new variable rate for six months.
The fixed rate
Here is where we lack certainty, except for one thing: If you purchase an I Bond in April, you will lock in the 1.20% fixed rate for the life of the I Bond, up to 30 years. We don’t know for sure how the Treasury will reset that fixed rate on May 1, which will apply to purchases from May to October.
The Treasury has no announced formula for setting the I Bond’s fixed rate, but I Bond watchers have settled on a forecasting tool that seems to work: Apply a ratio of 0.65 to the average 5-year TIPS real yield over the preceding six months. This formula has worked without fail at least since 2017.
On Friday I updated my 5-year real yield data from the date of the last reset on November 1, 2024, to Thursday’s close. The data predict the I Bond’s fixed rate will fall to 1.10% at the May 1 reset:
The I Bond’s fixed rate is always set to the one-tenth decimal point and that means the result of the 0.65 ratio calculation has to be rounded, which results in a projection of 1.10%. With only 12 market days remaining to the reset, that level is likely to stick.
However … We have a new administration running the Treasury Department at a time of some fairly dramatic employee reductions. There is no way to be sure what formula, if any, the Treasury will use to set the new fixed rate. I think it will be 1.10%, but this is not certain.
The composite rate
If you purchase I Bonds in April, you have one year of certainty: You will earn a composite rate of 3.11% for six months and then 4.08% for six months. Combine the rates and you get to a annual compounded rate of 3.64%. According to Bogleheads genius #Cruncher, a $10,000 investment will grow to $10,364 in one year (ignoring the 3-month interest penalty for redemptions before 5 years.)
Obviously, 3.64% isn’t going to make you wealthy over the next year, but I Bonds are more about protecting wealth than building wealth. An I Bond purchased in April is going to earn 1.2% above official U.S. inflation for as long as you hold it.
Purchasing in May opens a couple of unknown variables: 1) we don’t know for certain what the new fixed rate will be, and 2) we don’t know what will happen with inflation over the next six months. But it is certainly possible that a purchase in May will end up with a higher one-year return than a purchase in April, if inflation continues at a brisk pace.
Keep in mind that the difference between a 1.20% fixed rate and 1.10% (if that is the new fixed rate) is only 10 basis points, which equals just $10 of annual interest on $10,000 of principal. Not life changing.
Conclusion. I have been recommending buying in April (and I completed my purchases for 2025 in March). I’d still recommend April, but this decision is a bit of a toss-up and most likely both April or May purchases will work out well. If you want certainty, buy near the end of April (no later than April 28). If you want to wait it out, then buy in late May or …
What about October?
I Bond purchases are limited to $10,000 per person per year unless you add to your holdings through gift-box, trusts, or business-owner strategies. Some people like to spread I Bond purchases over the year, for example $5,000 in April and then $5,000 in October, or possibly even in November at the next reset.
The next “buying season” will open Oct. 15 with the release of the September inflation report, when we will know the next I Bond variable rate. And what about the fixed rate? I have been saying I know with 100% certainty that the November fixed rate will fall into the range of 0.0% to 4.0%. In other words … who knows? We have entered a year of wild financial possibilities.
One important thing to remember is that the November rate decision will be available for purchase in January 2026 when the purchase cap resets.
Are I Bonds that attractive?
With short-term T-bill rates still topping 4%, many investors are shunning I Bonds because of the potentially lower nominal return plus the three-month interest penalty for redemptions within five years. Some thoughts:
- We just went through a phase of inflation hitting 40-year highs, and higher prices could be returning in 2025 as we enter a turbulent era. Inflation protection, for part of your portfolio, looks like a wise choice.
- Eventually, the Federal Reserve would like to resume cutting short-term interest rates and then the T-bill returns will begin falling. But, yes, the future of rate cuts is unclear. T-bills remain attractive.
- I Bonds, if held for 5 years, create an inflation-protected store of cash you can use for future needs, with no penalty for redemption except for federal taxes on the interest.
Is this a short-term investment? I Bonds aren’t a good choice for money you will need in the next one or two years. You can get a 1-year T-bill paying about 3.9%. That nominal yield will beat the return of an I Bond after the three-month interest penalty is applied. I Bonds are best viewed as a longer-term, cash-equivalent investment.
Thoughts
I am a long-time advocate for investing in I Bonds, which create a tax-deferred, totally safe, inflation-protected investment with a flexible maturity date. If inflation heats up again as it did in 2022, you will sleep better at night with a treasure chest of I Bonds.
Again, this investment is not designed to make you rich. It is designed to protect a portion of your nest egg against inflation. April or May? It may not matter much, but I still stand behind I Bonds as an investment in 2025.
• Confused by I Bonds? Read my Q&A on I Bonds
• Let’s ‘try’ to clarify how an I Bond’s interest is calculated
• Inflation and I Bonds: Track the variable rate changes
• I Bonds: Here’s a simple way to track current value
• I Bond Manifesto: How this investment can work as an emergency fund
* * *
Follow Tipswatch on X (Twitter) for updates on daily Treasury auctions and real yield trends (when I am not traveling).
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. NOTE: Comment threads can only be three responses deep. If you see that you cannot respond, create a new comment and reference the topic.
David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
Treasury Inflation-Protected Securities 
Pingback: Savers will make more money on I Bonds after rates go up in May - newsgala.com
Hi David,
Are there any timing considerations for doing gift box transferring? Do you lose a month’s interest if you transfer the gift box ibond toward the end of month vs the beginning?
Thanks for all you do, David. Your posts are always educational!
Not David here, but to answer your question. I have purchased several gift bonds for my wife and she for me. The I-Bond starts earning interest from the 1st of the month that you purchase it, it doesn’t matter if it’s a gift I-Bond or a I-Bond you purchase for yourself, the bond is considered purchased on the 1st of the month you buy it. You have to wait a minimum of 5 days BEFORE you can deliver it to the person you bought it for. When you buy them be sure you have the registration in the person’s name first that you’re buying for. Like the ones I bought for my wife were “Her name AND POD my name”
Doug gave great advice in his response. I’ll add that merely transferring the gift box savings bond has no effect on taxes since no redemption has yet taken place. If the recipient wants to redeem, it is better to redeem near the beginning of a month since the current partial month receives no interest.
David, I don’t know if your web software notifies you when someone posts a new comment to a thread that’s “several columns back” and whose sequence of reader comments has gone dormant.
But this column about I Bond “buying season” is now almost two weeks old, and there are only a few more TreasuryDirect business days before the announcement of the new I Bond fixed rate taking effect May 1.
Are you seeing anything that changes your mind about the likely new rate or the advisability of buying before the end of April? And/or will you be posting a new column about that subject in the next few days?
The thing I wonder about most is whether the, uh, public service attitudes of the current national administration will simply rewrite what had for years been a fairly reliable predictive formula–though, of course, there’s no way to know that until we see it.
Thanks.
Yes, I am planning to post a re-cap update on Sunday. Monday is the ideal day to make an April purchase. Not much is new, though.
Last year I received the email that everyone else did to deliver ibonds stockpiled in my gift box to my recipient. Which I did. 40k per player, criss-cross. The rumor back then was that the Treasury would lock me out for the next four years. Looks like that is not the case as people who delivered in Dec were able to repurchase again in Jan. My question is could I fill up my gift box again tomorrow with 30 or 40k per…and could I deliver them to my recipient 2 days later? Has anyone done this?
Reason I was asking was I kind of like having inflation protection in my nontax deferred space, but some of these are at 0 percent or very low percent fixed. It would be nice to flip these into something that pays a little more.
Definitely not *2 days later*. You need to wait 5 days before you can deliver a gift-box I Bond. It’s possible otherwise that you could do this. I’d suggest buying the legitimate way first, because TreasuryDirect’s technical rules seem to indicate that a gift-box delivery would fill the purchase cap, ruling out a traditional purchase. But if you buy the regular way first, deliveries appear to work. (I did this last year, too, with two additional gift-box sets, all at 1.3% fixed.) This gift box system is a loophole, a problem the Treasury should fix, but it hasn’t.
When you redeem I Bonds you should try to do it as close to the beginning of the month as possible, since you earn no interest for the current month. When you buy, make the purchase close to the end of the month, like April 28.
I’ve been seeing the 10 to15 year range TIPS with around 2.15% fixed rate in the secondary market (at small minimum purchase quantities) with over 2.4% real yields above inflation. And some long (20+ years) TIPS at big discounts.
I understand the (probable) tax advantages and increased flexibility of I-bonds vs. TIPS in a taxable account.
That said, 6-year TIPS are now trading at 2% real, and long TIPS are getting pretty close to 3% real as of yesterday. I am not sure I see the wisdom of buying I-bonds at 1.2-1.3% yield when you could pad your TIPS ladder at much higher yields. A well-designed TIPS ladder offers almost as much flexibility as I-bonds, and by paying tax over time rather than in bulk sum at the time of withdrawal, it is even possible that you might ultimately save on taxes, IRMAA, etc.
In 2023 I sold close to $300K worth of old, low yielding I-bonds, paid the tax on the gains, and used the proceeds to add to my TIPS ladder at much better yields, plus I bought $20K worth of I-bonds at 1.3% fixed.
At today’s yields, I am asking myself at what point would it be wise to pull the plug on the 1.3% I-bonds, pay the 3 month interest penalty, and use the funds to buy more TIPS.
Do you ask yourself the same question?
And if so, at what TIPS yields would you pull the plug on your 1.3% I-bonds? 2.5%? 3%? 4%? There must be some limit.
Are any of you thinking the same way, or am I a lone voice in the wilderness?
No, I am not considering selling my recently purchased iBonds with 1.3% base yield. But yes I am currently adding as much TIPS and even nominal Treasuries as I can. Just picked up some 30 year at 2.8%+ real yield for example yesterday. But remember that iBonds, with their ability to be cashed in at a time of your chosing, serve a fundamentally different role from TIPS.
That is definitely an advantage, but how big an advantage?
One might argue that if you have a well-designed ladder, say, with TIPS maturing twice per year, that would offer you close to as much flexibility as I-bonds. As long as you had a little emergency funds in a bank or money market, the additional flexibility of I-bonds would melt to near zero.
Anitje, I think the investments have different purposes. If you are building a TIPS ladder (great idea) you are probably planning for future withdrawals/maturities in future years … holding to maturity. With an I Bond, withdrawals can be made at any time after 1 year, if you need the money. So that is a cash account, in my view, tax-deferred. I Bonds definitely have a purpose as a secondary cash reserve.
Actually, I meant to sign off as Patrick, not thurd2. Sorry.
Hi anitje. TIPs have both duration and deflation risk if you are a forced seller. IBonds have neither of those risks. Here is an example from my own portfilio:
I bought the 30Yr TIP if 2023 with a yield of 1.50% If I had to sell that TIP today I would have a loss of over 20% because of the increase in the real rates (duration risk). Happily I have a de minimis amount of money in it and only bought it as a hedge against interest rates going back to zero at some point in the future.
I also bought IBonds in 2023 with a fixed rate of .40% but since they have no duration risk I could sell them today at a nice profit even after taking the 3mo interest hit, a hit that goes away after 5yrs.
If you are absolutely sure you can hold your TIPs to maturity then you should definitely buy TIPs. Your only cost may be an opportunity cost of missing out on a better investment. But you really need to weigh the risk of needing that money or wanting that money for some other opportunity before the TIPs mature.
As far as spreading out taxes: IBonds are also ideal. You can redeem IBonds in any amount you want in increments of $25. For instance I have IBonds from 2003 with a fixed rate of 1.60% which if I held to maturity would be very tax inefficient. So I will start redeeming that IBond in parts years before it matures so it won’t effect my tax bill.
I think I have decided to hold my 2025 IBond money in sgov until October or December or until T-Bill rates fall below the composite rate on the IBond. Too many variables to know the optimal strategy given the Fed funds rate may go down or up (that would shock the market) given the effect tariffs have on the economy. I think Trump wants the revenue from the tariffs so they are not likely to go away in his administration.
A safer play is to split the investment but I already have a large complement of IBonds in my portfolio so take that into consideration when making your own decisions.
Seems like a strategy that will work, unless we get a shocker of a fixed-rate decision on May 1 (or more likely, April 30).
Yes I am a real risk taker. Hah. I have come to appreciate the quality of cowardice in my investing strategies but I will take risk if the circumstances are right. At one point in 2009, my best year ever, I had 80% of my assets in HY bonds and another 12% in stocks. Alas, now I am reduced to betting the fix rate on IBonds will hold close to current levels.
Look forward to your article on the 5yr Tips tomorrow. Thanks for all you do.
Do you find the 5 year tip yield attractive? I cant use the gift strategy to buy more ibonds, so i am looking to buy something else.
I will be posting an analysis of Thursday’s 5-year TIPS auction on Sunday morning. As a five-year investment held to maturity, it is highly likely to out-perform the I Bond.
David, as I mentioned in my initial reply I don’t know who is right, TD or the Eyebonds guy as to the calculations. The numbers are extremely close so it doesn’t really matter. Given all the problems with TD, I would give the edge to the Eyebonds guy. But TD is the one who gives me my cash when I redeem.
Eyebonds updating once every six months may explain the “issue” I have. TD also updates only once every six months.
Thanks for your feedback. Your site is always excellent. Some day I will list my big problems with I-Bonds, Social Security benefits taxes, Medicare benefits taxes, and my solutions.
I’ve been using Eyebonds for years and it is always accurate. The format and chart are helpful and easy to use. It makes sense that it is updated twice a year, in May and November, after the fixed rate is announced. It doesn’t make sense to update the information when it is incomplete. It also doesn’t make sense that TD doesn’t provide such an easy to use tool in an easy to read format like Eyebonds does. The only “trick” to interpreting Eyebonds is to remember that if you want to know the value of your I Bond when you haven’t held it for at least five years, you have to use the value three months prior to the current month in order to factor in the 3-month penalty. When you log into your TD account to see the value of your I Bond, it shows the value with the 3-month penalty factored in. Neither site shows both the current value and the value minus the penalty for I Bonds held for less than five years, which seems insufficient to me. But one can work around either method as long as one knows what it is. I have been selling my 0% I Bonds timed to minimize the 3-month penalty. Eyebonds shows me exactly when the new (lowest) rate kicked in based on the issue date of my I Bonds so I can see when to sell it with that in mind.
David,
I like to calculate my I-bond interest each month after the variable rate resets. I already know my fixed rate and after today I know the variable rate for the next six months. I don’t care about the next fixed rate because I am not buying. Currently, I have to wait until May 1 or May 2 and use the Savings Bond Calculator at TD. Has anybody posted a kind of “Savings Bond Calculator” so I don’t have to wait until May? Basically I should only need to input the date the bond was purchased and the amount, for each bond I own. Then total interest for each month in the next six months is calculated.
I recall someone had a spreadsheet you talked about a while back. But I want something simpler, where all I input is the date of purchase and the amount of purchase. I don’t care about the guts of the calculation, only that I get the right answer.
Patrick
https://eyebonds.info/ibonds/index.html
As Marce noted, EyeBonds.info is a great source for this info, but it hasn’t yet updated with the next set of data, which will probably update as soon as the next fixed rate is announced.
Thanks Marce and David. This is what I want. Unfortunately, when compared to TD Savings Bond Calculator, it is a little off. It calculates about .05% to .07% above Savings Bond Calculator’s figures for each month in the period Nov 2024 to Apr 2025. I don’t know which is correct. Seems to me they should be exactly the same, but it is probably accurate enough for most people.
More of an issue for me, I was hoping to get monthly calculations from May 2025 to Oct 2025 data, which can be calculated since my fixed rate is known (I am not buying any I-bonds in 2025), and the variable rate is already known. It does this for many purchase dates. But it stops the calculation at anywhere from May 2025 to Sep 2025 for many other purchase dates. I can’t figure out why. I cannot detect a pattern.
So I guess I will have to wait for TD’s Savings Bond Calculator on May 1 or May 2.
Patrick, Eyebonds.info is 100% accurate, and so is the Savings Bond Calculator, most likely. One thing to watch out for is that the the totals for each month are as of Day 1 of that month, in other words, the total up to the last day of the previous month. The Savings Bond Calculator won’t show the last three months interest for holdings of less than three months, but EyeBonds.info ignores that.
Example: $10,000 I purchased April 2020:
$12,412 as of April 1 on Eyebonds.info.
$12,412 in Savings Bond Calculator as of April 1.
Eyebonds.info shows $12,432 as of May 1 and so does the SBC.
David, as I mentioned the difference is not all that important, being so small. I am using various dates back to August 2001.
What is important to me is that I was hoping to get monthly calculations from May 2025 to Oct 2025 data. Eyebonds.info does this for some purchase dates. But it stops the calculation between May 2025 and Sep 2025 for many other purchase dates. I don’t know why. I can see no pattern.
I can wait until Savings Bond Calculator comes out which calculates what I want. This will be around May 1 or May 2.
Patrick, Eyebonds.info will only display investment totals for periods covered by the latest variable rate. Those rates roll into effect every month. April I Bonds just got the 1.90% in April, so the totals show for the next six months through October 1. May I Bonds have been on the 1.90% variable rate since November, so the totals only show through the end of April (May 1). In May, they will get the new variable rate and the site will show totals through November 1.
David, Thanks. The inflation rate is constant for six months (like the fixed rate). Only difference is we know the inflation rate a few weeks before the fixed rate. Here is what Eyebonds does as of Apr 12 2025 when I was checking it out:
Nov 2020 purchase. Calculates balance to May 2025, not after.
Oct 2022 purchase. Calculates balance to Oct 2025, not after.
I don’t see why it cannot calculate the Nov 2020 purchase balance to Oct 2025. It could do it, but maybe the author might have to input the inflation rate as of April 10 2025 (some 20 or 21 days before the fixed rate is known), which the author probably does not want to be bothered doing. Maybe it is because of some other reason along the lines David suggests. It is always tough to try to back engineer a program. I can wait and use TD’s Savings Bond Calculator on May 1 or May 2.
Other than this issue (for me), which apparently David says is not really an issue, the Eyebond Calculator is a nifty program. I like that it calculates the interest rate for the entire time the I-bond is owned. Savings Bond Calculator does not do this.
It would be cool if Eyebond Calculator could aggregate all my I-bonds and calculate my TOTAL I-bond balance each month like Savings Bond Calculator does. As it is, with Eyebond Calculator you have to copy and paste each I-bond calculations into a line in a spreadsheet, then add them all up for each month.
Final note, TD says “The Calculator is for paper bonds only. For values of your electronic bonds, log in to your TreasuryDirect account.” I only have electronic bonds. However, I always get the same value when I use the calculator and when I get a listing of all my I-bonds when I am logged into TD. I am not sure why TD gives this warning. Technically and legally they should give the same result, which apparently they do. Note that Eyebond Calculator gives results that are extremely close to Savings Bond Calculator, according to my check using I-bonds purchased at various dates from August 2001 to October 2022.
The Eyebonds.info site is run by a diligent guy without a single ad. He will make one big update to those I Bond charts when the new fixed rate is announced, or a few days after. One big update instead of two. He has been doing this a long time.
It is comical that Treasury insists its Savings Bond Calculator only works for paper I Bonds. The only oddity is that it won’t let you enter $10,000 and instead you have to enter a $5,000 amount (the old tax refund maximum) and double the total. I worry that it could kill off the calculator now that it is no longer issuing any paper I Bonds.
The tax benefits of putting the money in 401k and/or Roth are making me think I’ll pass on iBonds this year. I can buy tips in the Roth account though not the 401k.
I sure do miss my 10% plus composite yields from a few years ago. Hoping for a strong fixed yield so I can set and forget
What are the odds that we see a fixed rate as good as 1.1% at the November reset?
The latest Fed dot plot indicated rate cuts for nominals, which would affect 5-year TIPS and therefore I Bonds, right?
Of course, who knows what the future brings.
The financial markets are way too volatile right now to make any prediction about what will be happening in October.
I think I am going to split my $10,000 50/50 April and May. I am willing to take a fixed rate of 1.1 or even 1.0% for a chance at 1.3%
Regarding Gift I-Bonds. Does anyone know if there is a deadline to Deliver it? I recall some talk here about TD sending surveys on this matter. Can’t find anything about it on the TD site.
My best speculation is that the message last year was a poorly worded suggestion that confused and concerned everyone. I believe what was actually meant was “if you have gift box iBonds, don’t forget about them and deliver them at the time best for you”. I’m not aware of any changes or deadline to deliver. As far as I can determine, it works just the same as before.
I look frequently for updates on the Gift Box program, which I feel is a broken program. At the least, the rules need to be clarified. At this point, it does appear you can buy additional I Bonds using the Gift Box, if you have a trusted partner, and you can — by my observation last year — deliver them to a person who has already exceeded their yearly purchase cap. I am sure this isn’t what Treasury intended, but it has been working that way. It’s a gigantic loophole. I don’t plan to use it again.
Thank You Scott & David for the info. I will redeem my 2 zero percent I-Bonds to buy gift bonds now. And then Deliver it over the next 2 years. Ditto for my spouse. Not interested in gaming the system. Just want to keep life simple by following the rules (when they are clear and known). 🙂
I was set on waiting for October this year, but after the chaos this week I think I’m actually going to go with an April buy. Your [0.0%; 4.0%] range sounds just about right as it’s really anyone’s guess where rates are heading, and whether we might see high inflation or even deflation at this point.
My strategy is to capture the higher 26-week T-Bill rate now and have the bond mature in mid-October when I can still decide to buy an I Bond with a higher composite rate. The 10 basis point difference in the fixed rate component is de minimus IMHO.
What do you think of this vs 5 year tip being auctioned 4/15? FIDO lists as 1.6% everything is so distorted now, would you stay away?
Very informative article as always David, thank you. I’m planning to buy iBonds in April, probably my limit for the year. I like the guaranteed 1.2% fixed rate and not focused on the variable rate since I plan to hold for many years. In October, depending on circumstances, I may buy giftbox iBonds for 2026.
I look forward to your article on the 5-year TIPS auction next week, and VERY curious so see where the real yield ends up next Thursday – wild fluctuations recently. If the real yield drops down to near 1.2% I may not purchase the 5 year TIPS at auction and hope for higher real yields later on the secondary market. I’d be happy with a 1.75% real yield showing at this moment, but who knows where it will be next week.
I got locked out of my SS account, with nothing but hassle to fixit. Image if Im locked out of TD. Be years for me to have confidence in gov systems again and processes. Gov is converting to Login.gov and alike. Who really needs another login and password, especially if one gets locked out your locked out of everything and they doged the people who could help you. Im only selling not buying anything more.
I was locked out of TreasuryDirect a couple weeks ago (my fault). I called, the phone was answered within seconds (much faster than my bank, electricity, cable, etc.) and within 1 minute my account was unlocked. Great service and many thanks to all the federal government workers who are doing their jobs in the face of threats and layoffs to disrupt services for the public.
Love this post. The false narrative is federal workers don’t work (or don’t exist 🤦♂️) and the system is rife with fraud when the biggest fraudsters in history come from the private sector — Madoff, Enron, RJ Reynolds, the list is endless. Is there some corruption and waste in government. Most certainly there is. Are there laggards in government jobs. Yes. But are most people honest and hard-working? Yes. Great example.
I’ve never yet been locked out of my TreasuryDirect account, but I’ve had the same experience as Scott when dealing with TD by phone: courteous and friendly staff members, eager to be helpful if they can, and (although they can’t directly criticize their employer) clearly embarrassed by their own agency’s long account action wait times due to chronic understaffing.
I myself am a long-ago federal employee, in one of the agencies now under attack because it involves labor law (and for that reason also perennlially understaffed, especially during Republican administrations), and the current characterizations of federal employees by this president and his henchpeople bears no relationship to me or the people I worked with, all of whom were dedicated and conscientious. This attempt to create an image of evil, deadbeat, corrupt civil servants would be laughable if it weren’t such a lie and therefore so damned insulting.
Thanks for the usual well thought and clearly explained thoughts on the current Ibond decision.
I am stuck between a small Ibond investment and the new 5 year TIPS coming up. The TIPS real rate seems to have popped back to the area of 1.6%. Since I plan on holding the investment for the full five years, that’s looking good. I would love to see 2% or more real rate. Those were the days my friend.
As I write Bloomberg is reporting historically high real TIPS yields of 2.4% on 10-year (2.8% of 30-year) if you are able to accommodate the longer horizon.
There were two brief moments last week when the 5-year TIPS real yield fell below the I Bond’s fixed rate of 1.2%. Very brief. And then this week Treasurys seem to have become a pariah investment and nominal and real yields are popping higher. I will post an analysis of the new 5-year TIPS auction on Sunday morning.
what about selling existing I bonds that have a zero fixed rate and repurchasing? Is that a worthwhile strategy?
Yes, thanks for bringing this up. Over the last several years, I have been redeeming 0.0% I Bonds and replacing them with higher fixed-rate versions. Now I am working on some 0.1% fixed rates. It is a good strategy if you are happy with your total I Bond holdings. I don’t think investors should feel required to hold I Bonds to maturity — I say redeem when you need the cash or have a good alternative. One warning: taxes will be due.
Is nobody expecting an uptick in inflation anymore after the unusually OK inflation report? A few weeks or even days ago, it seemed like the tariffs might kick up inflation so dramatically that a stash of I bonds even with 0% fixed rates would be desirable to hold. That chance has declined, but is it still so unlikely that selling 0% bonds is advisable?
Reply to Maxpower (a reply to this post), inflation expectations, like so many other financial projections, are unusually challenging right now. Tariffs for example COULD increase inflation as they add to prices. But they COULD lower inflation by way of lower demand – or worse, by triggering a recession. Truthfully nobody knows. I see inflation protection as insurance against an unknown future – with the exception of the 6 month look back feature of iBonds – like when we had the opportunity to buy at 9.6% AFTER the inflationary wave. I have been mixing in nominal Treasuries when their rates are attractive just in case inflation runs low, but still buy mostly TIPS for my ladder.
Hi David,
Thank you for the article recapping the situation. Based upon the situation you have outlined. I believe I will split my 10K Ibond purchase 50% in April and 50% in May. That way I can only be 50% wrong…LOL……if indeed either decision is wrong.
Have a good day! I see TIPS yields are way up again today! Hooray!
I will await your further thoughts on 5 yr TIPS next week.