I Bonds are likely to get another surge in popularity.
By David Enna, Tipswatch.com
U.S. inflation rose a bit higher than expectations in September, while also setting in stone the variable rate for the Series I Savings Bond and Social Security’s cost of living adjustment for benefits in 2027.
Let’s put off the inflation discussion for a moment and look at the I Bond rate and Social Security COLA
I Bond variable rate
For September, the Bureau of Labor Statistics set the non-seasonally adjusted CPI index at 336.940, an increase of 0.59% over the August index. The I Bond’s new inflation-adjusted variable rate, to be reset November 1, is based on inflation for the months of April to September 2026, which ran at 2.04%. That means the new variable rate will be 4.08%, up from the current rate of 3.34%.
This 4.08% rate will apply to all I Bonds purchased from November 2026 to April 2027, but will eventually roll into effect for all I Bonds no matter when they were purchased. This means that even I Bonds with a fixed rate of 0.0% will earn 4.08% annualized for six months.
I am also expecting the Treasury to raise the I Bond’s fixed rate, currently 0.90%, to at least 1.30% on November 1, and 1.40% is very much possible. (This assumes the Treasury follows past practices.) That would mean I Bonds purchased from November through April will get a composite rate of around 5.4%, or a little higher. That’s highly attractive. I Bonds are going to be a popular investment.
If you have already purchased your I Bond allocation for 2026 — $10,000 per person per year — you will be able to grab the new rate after January 1, when the calendar resets. You can also consider using the “gift-box” option, which I believe is still viable.
I will be writing an update on I Bond strategies next week.
For TIPS. The September inflation report means that principal balances for all TIPS will increase 0.59% in November, after rising 0.32% in October. Here are the new November Inflation Indexes for all TIPS. At the end of November, principal balances for TIPS will have increased 3.7% for the year.
Social Security COLA
The September inflation report was the third of three — for July to September — that determine the Social Security Administration’s cost-of-living adjustment for payments in 2027. The SSA uses a three-month average of a different index, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), to set its COLA.
For September, the BLS set CPI-W at 330.654, which produced a three-month average of 328.746, an increase of 3.6% over the same average for 2025. That means the Social Security COLA will be 3.6% for payments beginning in January. The numbers:
This is the second year in a row that the COLA has lagged overall CPI, which is running at 3.7%.
The average monthly Social Security retirement benefit for 2026 is approximately $2,071, based on SSA data. A 3.6% increase will boost that to $2,146, starting in January. However, we are likely to see off-setting increases in Medicare costs, to be announced in November.
As it turned out, the 3.6% COLA matched my prediction made on July 26: “Forecasting Social Security’s 2027 COLA: My guess is 3.6%.”
The inflation report
The BLS reported all-items inflation of 0.6% for September and 3.7% for the year, higher than the economists’ estimate of 3.6%. Core inflation came in at 0.3% for the month and 2.6% for the year, which is probably a bit jarring for the financial markets and Federal Reserve. Core inflation had been trending downward for three months.
Gasoline prices, of course, were a huge factor in all-items inflation. Gas prices rose 9.1% for the month, after rising 3.9% in August. Year-over-year, gas prices are up 34.2%. Even more shocking is the increase in fuel oil costs (which aligns with diesel costs), up 15.3% for the month and 74.2% for the year.
On the positive side, prices for food at home fell 0.1% in September and are up only 1.8% for the year. More from the report:
- Shelter costs increased 0.4% for the month and 3.2% for the year.
- Apparel prices rose 0.3% for the month and 3.4% for the year.
- Costs of new vehicles increased 0.2% for the month and only 0.6% for the year.
- Prices for used vehicles jumped 0.7% for the month but are down 1.5% for the year.
- Airline fares increased 1.3% in September after rising 2.7% in August and are now up 22.4% for the year.
- Motor vehicle insurance costs rose 0.1% for the month and are down 5.0% for the year.
- Costs for computer equipment rose 1.4% for the month and 9.7% for the year.
Here is the trend for all-items and core inflation over the last 12 months, clearly showing the dramatic effect of the war/conflict with Iran, which began in March 2026 and continues today:
What this means for interest rates
September’s hotter-than-expected inflation report balances off recent reports showing weaker jobs numbers. Inflation appears to be the Federal Reserve’s number one priority, but raising interest rates will have little effect on the energy shock the U.S. and world are facing. From Bloomberg today:
“It’s clear as ever that inflation is stubborn and moving in the wrong direction,” according to Skyler Weinand at Regan Capital. “While we expect the Fed to pause on any rate changes in October, we expect rate hikes to resume in December.” …
The longer energy inflation stays elevated, the more likely it seeps into core inflation, so it’s a make-or-break moment for seeing whether the oil shock becomes a more systemic problem, noted Brian Jacobsen at Annex Wealth Management. Still, he says the Fed is likely to wait until December to hike again as a lot can happen between now and then.
This is from the Wall Street Journal:
Wall Street traders dialed up their bets that the Fed may indeed raise rates when officials meet in two weeks. Traders now see a roughly 50% chance of an October rate hike, up from 22% before the report was released.
I have been speculating that the Federal Reserve will hold off on increasing short-term rates at its October 27-28 meeting, less than a week before mid-term elections. In fact, if the Fed does raise rates on Oct. 28, it could indicate (to the markets) that the Fed is ‘panicking” over fear of inflation. Maybe it should panic, but holding off to December is probably a much easier path.
Unless the current energy shock is resolved, inflation is likely to remain elevated and more increases in short-term rates are coming.
• Confused by I Bonds? Read my Q&A on I Bonds
• Wise advice: ‘Don’t die with 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
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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.
Harry Sit has weighed in:
https://thefinancebuff.com/sell-i-bonds-buy-tips.html#htoc-fixed-rate
I have a lot of respect for Harry Sit, but I am going to disagree. I *really* like the flexibility that owning I Bonds gives me to use the money any time in the future. My strategy with TIPS (which I also love) is to buy and hold to maturity. Less flexible. So the question becomes: why are you making this investment? If it is to provide a cash-equivalent, inflation-adjusted savings account to draw on as you need it, then I Bonds make more sense. If not, then go with TIPS, because the higher real yield is the key factor.
I prefer I-Bonds for the opportunity to defer my tax liability like my Traditional IRA. I am converting my IRA to my ROTH IRA so I will have NO taxes on my investment income, and my heirs will not be burdened with any taxes. I’m willing to pay the taxes now, topping off my tax bracket each year. My strategy with I-Bonds is to use them like the IRA when I get old and need nursing home care. I will redeem the bonds and write off the nursing home care on my taxes.
Any idea what series ee savings bonds rates will be? How does the Treasury calculate it?
Good question. I don’t have a formula that works for the EE fixed rate, and Treasury has continued to hold on to the 20-year doubling period, which in effect becomes 3.53%. I would expect the fixed rate to rise from the current 2.40%.
Wow. Looks like we are officially in steering an aircraft carrier margins for the upcoming fixed rate.
That’s true for the 1.3% fixed rate, which is locked in, but the 1.4% equation is going to be extremely close. We don’t know exactly how the Treasury sets this fixed rate, but the theory is that it looks at the last six months of 5-year real yields. Some Bogleheads theorize that starts 5 days before the last reset date (I haven’t used that theory). If you do use the 5 days before May 1, you will be more likely to end up at 1.3%. There has never been a rate-setting calculation this close. NEVER. I will post an analysis Sunday (to get closer to the date).
You mentioned you haven’t used the theory that the window starts five days before May 1. I ran it, and it matters this time; and it sounds like you did the same analysis. The late-April yields were only about 1.3%, so counting those days pulls the average down and the rate comes out at 1.30% instead of 1.40%. Every past reset gives the same answer either way, so the history can’t settle it.
This is wild, isn’t it? It is going to be very close between 1.3% to 1.4%, and the Treasury’s final decision will give us a strong hint on the formula it actually uses. (If it continues to follow past practices.) I will post an analysis on Sunday morning so I can include Friday’s close.
Hi David,
I got a couple of emails from Treasury Services on Friday in response to the FS Form 5511 transfer request I submitted in May. I am trying to have my cake and eat it too. I am in the process of transferring ownership of some December 1998 3.3% fixed rate I-Bonds from my TreasuryDirect account to my wife’s account. A 1099-INT will be generated for me for the accumulated interest, and the interest earned tax deferred between the transfer date and December 1, 2028 will accumulate in my wife’s name. I’m doing this to shift a portion of the tax bomb into 2026 & 2027 from our 1998-2001 I-Bonds while my wife continues to earn 3.3% plus inflation.
One of the email messages is attached below:
This correspondence is from the US Treasury Department regarding Treasury Retail Securities.
We have received your inquiry about the transfer of United States savings bonds from your TreasuryDirect account.
Reportable transactions usually involve the removal of a living owner/principal co-owner’s name from the registration. The transfer of Series EE/I bonds will eliminate the principal co-owner and are considered a taxable event. When the new bonds are issued, the interest earned to the date of reissue will be reported to the Internal Revenue Service (IRS) under the owner or principal co-owner’s taxpayer identification number (TIN) as required by the Tax Equity and Fiscal Responsibility Act of 1982.
This transfer request will initiate a taxable event. You will need to access the TreasuryDirect account of the principal bond holder and print the 1099-INT next January.
Congratulations clearlyc1655a3a91, it appears you were successful in your plan to prepay some of your taxes before the “tax cliff” from the high fixed rate I-bonds when they mature. I’ve moved our 2001 I-Bonds to our trust account so am unable to use this strategy but have another plan to minimize my taxable income for 2031 so the tax hit from the I-Bonds will be manageable.
I have no comment because my tax-expert skills are 3rd-grade level. If this works, I am impressed. I am simply selling off one-fifth of my 2031 I Bonds each year up to the final year. At least I can replace those (for now) with decent fixed rates.
If filing a joint tax return, the 1099-INT reported in your SSN or the wife SSN would impact tax return the same? Unless, of course, you have several wives. Congratulations on the 1998 3.3% fixed rate – being in company of Mr. Enna is quite the accomplishment.
I’m thinking the plan is not to avoid the tax, but to transfer, pay the tax, and then retain the high fixed rate I Bonds in the other account, with the tax clock restarting.
Yes, our plan is for my wife to transfer other 1998-2001 I-Bonds to me that are currently in her account in 2027 & 2028 and for me to transfer a couple of these to her in 2029 (yes, only one wife). These will be taxable events on our joint income tax returns each year — 1099-INTs in my SSN in 2026 and 2029; 1099-INTs in her SSN in 2027 & 2028.
David – yes, my goals are to shift some income from the 2028-2031 22% tax brackets to the 2026-2028 12% brackets, continue earning 7+% interest and also avoiding IRMAA surcharges by reducing income in the 2028-2031 I-Bond tax bomb years.
Thank you Tipswatch. Good catch and detective work. It went over my head, but I think I see it now:
1) Keeps the 3.3% fixed interest rate until the last maxwell house drop in DEC 2028 final month of interest
2) Spreads the tax bomb blast beginning this year – which might make sense, but only if the 2027/2028 overall tax brackets are reasonably estimated
3) Celebrates this victory with that cake. Either way the tax wind blows – finish line with a 30 year 3.3% fixed rate – what a ride
I am exploring the idea of swapping an older I Bond from January 2023 which has 0.4% fixed rate for a new one with 1.3% or 1.4% in November. I know I would incur a three-month interest penalty and pay taxes on the accrued interest but if the break-even timeline is close to a year, it seems like a good move. Is there anything else to consider?
This is a good question for AI so I asked Chat GPT. Here’s its answer:
If you swap your January 2023 I Bond with a 0.4% fixed rate for a new I Bond in November 2026 with a 1.3% fixed rate, the estimated break-even time is about 14 months. If the new bond offers a 1.4% fixed rate, the break-even time is about 13 months. These estimates assume the old bond’s current composite rate is around 4.26% and account for the three-month interest penalty for redeeming before five years. After break-even, the higher fixed rate continues to benefit you for the life of the new bond.
Rolling over a low fixed-rate I Bond for a higher-fixed rate I Bond is usually a sensible idea, as long as you actually intend to hold the new I Bond for a few years. You will owe taxes on the redemption. A $10,000 I Bond from Jan 2023 redeemed in November will get you $11,488 (with the penalty), so you will owe taxes on $1,488. Let’s say the tax bill will be about $325. The new I Bond is going to earn you about $90 a year more, so it takes time to recoup that tax cost. The penalty (which is only $108) isn’t the big factor, the taxes owed is the immediate problem.
Thanks for always keeping up with the latest and making it understandable for the masses. Meanwhile, keeping track of which system uses which log in method has become a real hassle. Certainly wish all government related entities could just use one government run system. Unless one never has to access the IRS, SS, Medicare, Treasury Direct, or Global Entry if you travel, capturing your digital identity is nearly unavoidable now.
Another one for identity collection aimed at our youngest citizens – Treasury Dept. has created auto-enrollment for the new Trump Accounts for all children under age 18 with no ability to opt out or close the account.
Free $1,000 for a child with no red tape buys good will even if it’s heavy-handed, I guess. BTW, Harry Sit of The Finance Buff, recently posted this article which you may find if interested:
Converting a Trump Account to Roth Isn’t as Powerful as It Sounds
https://thefinancebuff.com/convert-trump-account-roth-utma.html
David, I’ve learned so much from you and others here, and I’m amazed at how much there is still to learn. AI can help too sometimes :-). This morning I was wondering about differences in real yields for bonds that mature close to each other and Gemini’s response was very illuminating. I thought it might be interesting for others, so here it is:
• CUSIP 912828Y38: A 5-year TIPS issued in 2023 that matures on July 15, 2028, carrying a 0.75% coupon.
• CUSIP 912810FD5: A historic 30-year TIPS issued way back in April 1998 that matures on April 15, 2028, carrying a 3.625% coupon.
The difference you are seeing in the Vanguard table (which mirrors institutional data like the Wall Street Journal TIPS Table) where the April 2028 bond yields around 2.47% and the July 2028 bond yields around 2.13% is a known phenomenon in the fixed-income market.For bonds maturing just three months apart, a 0.34% (34 basis point) spread is large. It is primarily driven by CPI Seasonality and the Index Ratio Lag.
The Core Driver: CPI SeasonalityTIPS adjustments are tied to the Non-Seasonally Adjusted Consumer Price Index (CPI-U). Inflation in the United States does not move in a smooth line throughout the year; it follows a predictable seasonal pattern:
• Spring/Summer: Prices historically rise sharply (higher inflation).
• Autumn/Winter: Prices typically flatten or decline (lower inflation/deflation).
Because the standard yield-to-maturity (YTM) formula assumes a perfectly smooth path and does not account for this predictable calendar volatility, it creates a structural distortion in the reported real yields of bonds maturing in different months.2. The 3-Month Reference Lag The Treasury calculates a TIPS bond’s final payout using a three-month index lag. This means the inflation adjustment at maturity is locked into a specific seasonal window:
• The April 15 Bond (912810FD5): Its final value is based on the January CPI. January represents the end of the seasonally weak winter inflation cycle.
• The July 15 Bond (912828Y38): Its final value is based on the April CPI. April captures the seasonally explosive spring inflation surge.
Because the July bond is guaranteed to capture the strong spring inflation bump right before it matures, the market adjusts its upfront price upward. A higher market price automatically pushes the calculated real yield lower. Conversely, the April bond misses this surge, trading at a lower relative price and a higher reported real yield.
I see this makes sense. I had wondered why the difference in market pricing to real rates on these types of close maturity dates in my own portfolio.
I have written on this topic often and in fact it will come up again Sunday in my preview of the 5-year TIPS auction. The October auction tends to get a lower real yield than the current “market,” which reflects the trading yield of the last 5-year TIPS issued in April. That April TIPS is subject to closing months of deflation, so it gets a higher yield. This effect becomes more pronounced as the term gets shorter. (Gemini may have pulled from my writing, did it give Tipswatch credit? If not, shame.)
Another factor in the pricing: The April 15 2028 TIPS has an inflation factor of 1.114, so investors are buying 11.4% additional principal. The July TIPS has an inflation factor of 1.332, meaning investors would be buying 33.2% additional principal. That makes the July TIPS slightly less attractive for some investors, but not enough to overcome the seasonal factor. April maturities almost always have higher yields.
We are at a 5 year TIPs auction date now. Do you have any commentary regarding this auction set for Oct 22, 2026?
I will be posting a preview article Sunday morning. I do that for every auction.
PPI came in at 6.3% YoY, with PPIcore at 5% YoY.
PPIcore (less food and energy) at 5% is what really concerns me, as that’s showing that producers expect energy input costs to remain elevated, and ergo are more than willing to pass those costs on to end users.
Buckle your pants. The ride continues.
Unfortunately, price inflation is rather sticky in non-commodity markets. While key commodity prices may eventually decline, it’s really hard to convince the boss we need to lower prices to stay competitive in the finished goods market until a real recession hits. And it’s always much easier to make a 5% price increase stick if you can argue “inflation made me do it”.
And, only tangential, but to the good folks at Bureau of Labor Statistics….I’m never one for conspiracy theories, so I guess the one about BLS intentionally understating inflation in this administration either failed miserably or it really is much higher ;).
Not to beat a dead horse but before I early redeem years of IBonds or move forward under the increasing rates, I looked under a few more stones. My ‘comparative case’ is setting up login access to Medicare which offers the Login.gov option. Seems Login.gov also uses third party, private company verification via Socure. “Xcelerate Solutions and its subcontractor Socure have been awarded a five-year, $163 million call order to provide identity proofing technology for Login.gov, the federal government’s shared sign-in service…… Socure will provide the underlying digital identity and fraud detection capabilities.” This includes photos of driver license, and optional (we’ll see) selfie. Socure’s Terms of Use and Privacy policy contain red flags: no suing, no class actions, no liability, they can be sold to another company.
https://www.biometricupdate.com/202607/xcelerate-and-socure-win-163m-login-gov-identity-proofing-contract
So now the only distinction between ID.me and Login.gov (Socure) is whether they were hired through a bid process or not?If all roads are leading to selfies and biometrics I might as well capitulate with ID.me. This feels worse than terrible. Some say it’s progress; I’m just not there yet.
Very helpful information, thanks.
Do they both have ads on their websites? The idea of ID.me trying to get you to buy something after completing the setup is ridiculous.
I’ll note that once you set up ID.me, it serves as a log-in way station to TreasuryDirect and you never actually see their site again (which I agree is not appropriate for a Treasury or IRS login).
No Socure ads when I completed Login.gov setup for Medicare. Also, the selfie was required. I decided to early redeem a few years of Ibonds. Ill invest in a short term tbill until I can build a TIPS ladder in a few months. Even though there’s an Executive Order for agencies to at least offer Login.gov within about 2 years, I expect Treasury to pursue an opt out provision. Ill miss Ibonds.
I have a login.gov account from before the time when they required biometrics and such, so I was assuming it was still run in that fashion. Argh.
David – Congratulations on being quoted in today’s Detroit Free Press article. I hope you continue to live and breathe to crunch inflation forecasts.
Thank you David for the always timely updates! With the October 28 date looming to change my TreasuryDirect login over to ID.me, I was curious about options for establishing my Medicare login. Medicare offers ID.me or Login.gov. Login.gov requires I upload a photo of my driver’s license, and possibly a selfie for verification. I was surprised by this requirement because I have working Login.gov access for Social Security (I don’t recall if I had to upload a photo several years ago when I established the Login.gov access) So, if I must relinquish the drivers license photo anyway to Medicare (using Login.gov), is there any reason not to capitulate doing so for ID.me in TreasuryDirect?
I also have a login.gov account for use with the Social Security site, but I can’t recall the requirements for setup. It may be different for different government sites. I seem to recall the procedures were similar, but I succeeded the first or second time trying on login.gov and gave up after fails with ID.me. (I have since succeeded in setting that up.) There is one huge difference: Login.gov is a government-run verification service and ID.me is a private company. But if you want access to TreasuryDirect, ID.me will be the only option after Oct. 28.
Thank you for pointing out the distinction. Not a minor one. Since our memories fail on what was required to access to Soc. Sec. I found this online: “The facial recognition option builds on Login.gov’s existing identity verification process, which requires validation of a government-issued ID and a phone number or address.” https://federalnewsnetwork.com/it-modernization/2024/10/login-gov-facial-recognition-option-gets-gsa-approval/
So it looks like the driver license requirement was established at least 2 years ago. Yeah.
Mr. Enna, Thank you for Oct 28 reminder. After logging in with ID.me a pleasant surprise at Treasury Direct. All accounts with same SSN grouped, organized and clearly presented. Individual Accounts section & Entity Accounts. Before, we had to use separate account logins for each individual, entity trust and entity business account.
Another data point that came out recently which is not exactly inflation but in the ballpark is the Average Wage Index value for 2025 (which is the latest as it is two years behind). This feeds one’s initial calculated Social Security benefit and impacts that value before COLA kicks in. The increase from 2024 to 2025 is 4.23%, so for those of us not on Social Security at the moment, this is our ‘raise’ for 2027.
>For those of us not on Social Security at the moment, this is our ‘raise’ for 2027
Don’t count on that.
Work in a company experiencing wild success in a way that is… “AI-adjacent enough” to get all the benefits, but isn’t “AI.” So wouldn’t face huge consequences in a correction, but benefits from most upside.
No COLA adjustment this year. Even for top performers.
Despite expecting another earnings blowout in less than a month.
I was worried about being gone by the end of the month as part of belt-tightening post-acquisition. I THINK I’ve dodged that (tons of E-fund if it did happen), but I’m aware if the winds blow in the wrong direction they’re will be post-acquisition cuts to appease investors.
Waiting to buy I Bonds in November was a no-brainer this year. I was so convinced of it that I have T-Bills maturing then with those funds earmarked for I Bonds. I will buy $20K split between my wife and I, and will have an other $20K in T-Bills come due in April to fund 2027 I Bonds for either May or June if the situation is similar.
Agreed.
Some folks will always want to just lump sum everything in January. I understand those folks! I understand the desire for simplicity 🙂
For those of us willing to micro-optimize a bit, the real “decision points” for I-Bonds are usually November (which can follow to April), May and October. Those are the points before/after of a shift in rate.
Not exactly a no-brainer (since I did buy earlier in the year). At the time, I assumed I would just use the gift-box option in November, but now I think I probably won’t, based on personal cash flow. But I will be buying in 2027. The war with Iran threw a fireball into U.S. inflation, and it is not over yet.
I couldn’t understand the rationale of buying I Bonds before the May 1 reset this year. In April the fixed rate appeared likely to hold at 0.9%, which meant another six months to see if real yields would move up or down. One of the main advantages of I Bonds over TIPS is the 6-month interest rate lock that reflects past trends in real yields. The Treasury even mentions the “deferred purchase feature” as a component unique to savings bonds in setting the fixed rate.
I only consider buying in April or October, because those months provide the most reasonable certainty of where the fixed rate is headed. If the fixed rate appears likely to fall in May, consider buying in April. If the fixed rate looks to stay unchanged, defer purchase until at least October to see if the fixed rate will rise or fall in November. This is one of those years when it made sense to wait.
The only question now is whether the fixed rate will rise to 1.4%. The upcoming rate reset may be a bit harder than usual to predict, as we don’t know whether the Treasury’s six-month real yield calculation starts May 1 or if it includes the last few trading days of April when real yields were much lower. I am leaning 1.4%, but the average may end up just barely rounding down to 1.3%.
I look forward to reading your analysis, David.
I want to elaborate on my “no-brainer” comment. There’s no rush to buy at the start of a new calendar year. There’s more certainty about the decision to be gained by waiting until mid-April every year. I believe you’ve recommended that on more than one occasion in your articles.
When we got to that point, we knew the fixed rate would remain unchanged and the variable rate would rise less than 0.25%. Basically the May 1 I Bind was identical to the prior one.
BUT, a war had started two months earlier, the Strait of Hormuz was immediately closed, and we saw the first month of inflation afterward increased almost a full 1%. That’s a pretty compelling argument in favor of waiting until mid-October. The monthly inflation rates this year:
January – 2.4%
February – 2.4%
Iran War Starts
March – 3.3%
(May 1 I Bond Reset)
April – 3.8%
May – 4.2%
June – 3.5%
July – 3.4%
August – 3.4%
September – 3.7%
(November I Bond Rate Change)
OK, you are right, but at this point you are just piling on. Easy to predict the past from the present. At the time, I considered it a toss-up, and I knew I would probably have the gift-box option at the end of the year, which I do still have. But I can wait until January. You made the right decision, as did everyone who decided to wait.
It was not my intent to pile on, sorry if that’s how it came across to you. I initially didn’t even know the timing of your purchases until you responded afterward. I guess I should have left it at that. I appreciate what you do here very much.
Should “when the calendar rests” say “when the calendar resets”?
Thank you. Fixed
Mr. Enna,
Does this line, near the end of today’s post, need to be corrected: “In fact, if the Fed does rate rates on Oct. 28, it could indicated (to the markets) that the Fed is ‘panicking” over fear of inflation.”?
Thank you for your updates and analysis!
And thank you for reading all the way to the end. It’s fixed.
I guess all those 2022 I-bond buyers who bailed after rates went down will be back!
And be complaining about the purchase limits again.
Thank you so much David!
The very high cost of diesel fuel and fertilizer is going to push up the costs of most everything else up.
For those of us who have been waiting until mid-to-late November to buy our I-Bonds for 2026, it looks between the 1.40% fixed rate and 2.08% composite rate, that purchase will have a 5.51% rate for six months.
Fixed rate and composite rate of the I-Bonds in my portfolio:
* 0.00% – 4.08%
* 0.40% – 4.49%
* 0.90% – 5.00%
* 1.10% – 5.20%
* 1.20% – 5.30%
* 1.30% – 5.41%
* 1.40% – 5.51%
My I-Bond portfolio’s blended fixed rate increases to ~0.909%, and my portfolio’s blended composite rate increases to ~5.008%. This is despite quite a chunk of it with fixed rates at 0.00% or 0.40%.
Checking brokerages, current yields on no/ultra-low risk “cash” for durations <= 1YR (maybe 2) tops out around ~5.05%. So despite having a chunk of I-Bonds with a 0.00% and 0.40% fixed rate, I’m not only competitive with that, but will keep pace if inflation continues to rise.
I am content! :). I keep “cash-cash” earning 4.25% APY in a demand savings account at my credit union, but for my E-fund I’m content.
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I’m interested to see what next May brings. With my finger in the wind I feel my blended fixed rate will reach 1.00%. Though I’ll remain patient in 2027, with potential decision points being late April, late October or late November depending on how the wind is blowing.
Mr. Goofington, you obviously know what you doing.
You posted “Checking brokerages, current yields on no/ultra-low risk “cash” for durations <= 1YR (maybe 2) tops out around ~5.05%.” But, how are you finding these 5.05% returns? The highest yielding money market fund I find at about 3.75%. Also, if the Nov fixed rate does arrive at the possible 1.4% that you have calculated, will you be a buyer before end of this November?
My other status update post was misplaced, but you are correct.
We’ll see where PPI numbers are tomorrow. They’ve been quite elevated since the reported April figures, staying fairly steady.
It’s possible that it wavers down, but it’s entirely unlikely that there’s a major downward correction to below 3.5% which is what would be necessary to indicate that it will genuinely taper off going into 2027.
We’re at the point where those older PPI figures are now trickling down into CPI numbers. Ergo, I don’t see CPI figures tapering off any time soon. If PPI starts to correct, we’ll see CPI follow in 3-6 months. Otherwise, we remain on the general current trajectory for a bit still.
I don’t like this emphasis on “energy shocks”. What you’re saying, and what most commentators and the FOMC themselves are saying, is true. It’s also beside the point: even the government indices that have been designed to understate price increases have been consistently far above the FOMC’s target for many years now. Whether an energy supply shortfall feeds through into other prices, when, or to what extent, should have no bearing whatsoever on monetary policy. Policy must be tightened. Immediately, repeatedly, and strongly, until it becomes clear that the rate of price increases has settled at a consistently much lower level. All that energy price increases are doing is making that even more necessary and urgent than it already was. Today’s “energy shock” sounds an awful lot like 2020’s “transient phenomenon”: an excuse for further policy looseness by an institution that was created for that purpose and has a long track record of living up to it.
100!
The FOMC has been fat, lazy, and stupid for several years. Inflation has been way too high for way too long, starting long before the Iran war, which, yes, is making inflation even worse, but the FOMC lollygags and hems and haws and waits for more data.
Fred, did you see my reply to you in the Pandora’s Box article? Worth a look.
While I am not a fan of saying the energy shocks are a one time thing because they do feed through to other things, I don’t go so far as to say the indices are designed to understate price increases. Nor that transitory was an excuse for looseness.
Transitory was a mistake semantically, but only in that the ability of business to recover from the supply shocks took longer than anticipated. We like to think businesses are rational actors that know what they are doing. When in reality the great and powerful Oz behind the curtain is just a bunch of people who often do not know what they are doing and spend money irrationally.
Lastly, the Fed being above target is a problem of their own creation – by setting an explicit target – in 2012. Apparently the idea of an explicit target was first brought up in a July 1994 FOMC meeting, followed by formal debate the next year and so on.
Every time I see “above target” I wonder how long inflation was above the now explicit 2% target from 1960 to the present.
Rocky, I did not. Probably the reply depth limit meant I did not get the usual mail on it (as you will not here). My apologies for not having read it until now; I will follow your references there and ruminate further. As you say, they are worth a look. To comment further here would be off topic.
I can’t agree about the target itself being the problem. The Federal Reserve’s notorious dual mandate includes “price stability”, which by any plain reading and certainly when it was written in 1913 would mean that there was always a target and that target is zero. One of the main premises of progressivism is that the past being horrible is no excuse for making the present horrible in the same way. Whether or not I agree with progressivism in general, that aspect does seem only reasonable. Surely you are correct that poorly-measured prices rose much faster than 2% per year in the 1960s, but that does not justify loose policy today that encourages the same result. The target is and should always be zero, and tightening should not be discretionary when price increases have exceeded the target by such a large margin for so long a time.
Fred, let’s keep politics out of it! My 1960 reference was not to justify current inflation, but simply to make people realize that inflation has almost always been above a 2% target since 1960, with limited exceptions. The current episode is no different than all of our lifetimes – it is above a stated or unstated target.
0% inflation is not a good goal. Been awhile since I looked into this, but absent some degree of inflation the economy would really suffer. Be careful what you wish for.
Hopefully the tax info helps fill in holes that reporting leaves blank. There is some concern that such data is no longer going to be released by the government, as they are months past the normal release date for the 2025 tax year. (For those playing at home, the information is IRS data on tax returns segregated out by income levels etc).
I came here before reading mainstream press. Thank you!
Same. I always appreciate David’s analysis. Thanks David!
Thanks for being all over this story.