Anyone who drove a car before the 1973 gas crisis fondly remembers gasoline at 25 cents a gallon. That’s what it was selling for back in 1963. Those were the days! But in reality, gas prices are almost as cheap today as they were in 1963.
Yes, that is a negative number, and it means that returns for investors in CUSIP 912828X39 will slightly lag inflation over the next five years.
Investors in US Series I Savings Bonds are in an interesting ‘limbo’ period right now, leading up to the May 1 reset of the I Bond’s variable and fixed rates.
The U.S. Treasury on April 20 will auction $16 billion in a new 5-year Treasury Inflation-Protected Security (CUSIP 912828X39). The coupon rate and real yield to maturity (after inflation) will be determined at the close of the auction.
This decline in the variable rate sets up an interesting decision for I Bond investors: Buy before May 1 to get the 2.76% variable rate for six months, or wait until May 1 to see if the I Bond’s fixed rate – currently set at 0.0% – will rise to 0.1% (or higher).
>>Read my full analysis on SeekingAlpha.com
Also, I have updated my Tracking Inflation and I Bonds page with these new numbers.
And here are the May CPI indexes for TIPS.
The idea with I Bonds is to build a large inflation-protected cache, as part of an overall portfolio that includes stocks, bonds, nominal Treasurys, TIPS, bank CDs, mutual funds. The difficulty is that there is a $10,000 per person per year purchase limit on I Bonds, so to build a large stockpile you have to buy them every year. And then the question is: When do you make the purchase?
