Inflation Report Sets I Bond’s New Variable Rate At 1.40%

Summary

  • Energy prices drove overall inflation up sharply in March, giving a boost to the I Bond’s variable rate calculation.
  • I Bonds purchased before May 1 will offer an overall one-year return of 2.4%, but most importantly will carry a permanent fixed rate of 0.5%.
  • My advice continues to be: Buy I Bonds up to your full allocation before the fixed rate is reset on May 1.

U.S. inflation surged a bit in March, the Bureau of Labor Statistics reported today, providing the final piece of data needed to set the new inflation-adjusted variable rate for U.S. Series I Savings Bonds.

Read my full analysis on SeekingAlpha.com

Also, I have updated my Tracking Inflation and I Bonds page with the new data.

And here are the new May inflation indexes for all TIPS.

 

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Inflation Warriors: It’s Time To Buy I Bonds

Summary

  • The current fixed rate of 0.5% is likely to fall on May 1, possibly to as low as 0.2%.
  • I Bond investors can lock in that 0.5% fixed rate for up to 30 years by investing before April 30.
  • A new inflation-adjusted variable rate is also coming May 1 and may be substantially lower than the current 2.32%.

I failed to follow my own advice this week. I put in an order to buy my full 2019 allotment of U.S. Series I Savings Bonds on March 28. Why? Because the time is right to buy I Bonds.

Read my full analysis on SeekingAlpha.com

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Real Yield On 10-Year TIPS Reopening Dips To 0.578%

Summary

  • The after-inflation yield was the lowest for any 9- to 10-year TIPS auction since January 2018.
  • The inflation breakeven rate came in at 1.94%, a fair number that indicates this TIPS is neither cheap nor expensive versus a nominal Treasury.
  • Looking for a better option for inflation protection? Consider U.S. Series I Savings Bonds, purchased through April 30.

Read my full analysis on SeekingAlpha.com

 

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Skip This 10-Year TIPS Auction, Buy I Bonds Instead

Summary

  • Thursday’s 10-year TIPS reopening looks likely to get a real yield to maturity of around 0.64%, well below January’s 0.919%.
  • Investors will pay a premium, because the real yield will be well below the coupon rate of 0.875%.
  • U.S. Series I Savings Bonds currently carry a fixed rate of 0.50%, making them very attractive versus a 10-year TIPS at 0.64%.

I can’t recommend buying a 10-year TIPS with a real yield of 0.64% when U.S. Series I Savings Bonds currently carry a fixed rate of 0.50%. That fixed rate, available for purchases through April 30, is equivalent to the I Bond’s “real yield.”

Read my full analysis on SeekingAlpha.com

TIPS auctions

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U.S. Inflation Rose 0.2% In February; I Bond Investors Get Bit Of Good News

Summary

  • In a reversal of recent trends, food and energy prices increased while other prices were muted.
  • Core inflation rose only 0.1% in the month, below the consensus estimate of 0.2%.
  • Non-seasonally adjusted inflation rose 0.42% in February, a bit of good news for I Bonds’ variable rate reset, coming May 1.

February’s non-seasonally adjusted increase of 0.42% is good news for holders of – and possible future investors in – I Bonds.

Read my full analysis on SeekingAlpha.com

Check my Tracking Inflation and I Bonds page for the updated numbers.

And here are the new April Inflation Indexes for all TIPS.

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30-Year TIPS Auctions With Real Yield Of 1.093%, To Strong Demand

Summary

  • The after-inflation yield of 1.093% was well below the real yield of 1.235% generated at an October auction of the same term.
  • Indirect buyers – meaning big money investors like foreign central banks – bought a record 82% of the $8 billion offering, indicating strong demand.
  • The inflation breakeven rate came in at 1.96%, below the number for recent auctions of this term.

This auction was greeted with apparent strong demand, with indirect bidders (primarily central banks, pension funds, and hedge funds) purchasing a record 82% of the $8 billion issue.

Read my full analysis on SeekingAlpha.com

 

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This Week’s New 30-Year TIPS Still Isn’t A Winner

Summary

  • 30-year real yields have been climbing, but remain below levels that would make them “interesting.”
  • The 30-year inflation breakeven rate is currently trending at 1.9%, an attractive number but one that reflects the reality of stubbornly low inflation.
  • Conclusion: This is a risky investment.

Read my full analysis on SeekingAlpha.com

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