The U.S. Treasury’s reopening auction of a 10-year Treasury Inflation-Protected Security — CUSIP 91282CBF7 — generated a real yield to maturity of -0.805%, a bit higher than was indicated by open-market trading in this TIPS.
This is a 9-year, 8-month TIPS and it carries a coupon rate of 0.125%, which was set by the originating auction on Jan. 21, 2021. And while an after-inflation yield of -0.805% is very low by historical standards for a TIPS of this term, it was still above the record low of -0.987% set at the January auction.
A TIPS is an investment that pays a coupon rate well below that of other Treasury investments of the same term. But with a TIPS, the principal balance adjusts each month (usually up, but sometimes down) to match the current U.S. inflation rate. So, the “real yield to maturity” of a TIPS indicates how much an investor will earn above (or below) inflation.
The negative real yield does not mean that this TIPS will have a negative nominal return. But it does mean it will have a return that lags official U.S. inflation by 0.805% over the next 9 years, 8 months.
Because the real yield was well below the coupon rate of 0.125% (the lowest the Treasury allows for a TIPS) investors at today’s auction had to pay a sizable premium for this TIPS, an adjusted price of about $111.149 for about $102.13 of value, after accrued inflation and interest is added in. This TIPS will have an inflation index of 1.0166 on the settlement date of May 28.
So, in other words, an investor who put $10,000 into this TIPS will have paid about $11,115 for $10,213 in value, and will earn an annual coupon rate of 0.125% along with inflation accruals that match U.S. inflation for 9 years, 8 months.
CUSIP 91282CBF7 trades on the secondary market, and had been trading with a real yield in a range of -0.84% to -0.85% right up to the auction’s close at 1 p.m. EDT. Because the real yield came in a bit higher at -0.805%, this indicates less-than-strong demand for this reopened TIPS. On the other hand, the bid-to-cover ratio was 2.5%, indicating decent demand.
Here is a chart showing the history of 10-year real yields over the last two years, showing the dramatic bump higher in mid-March 2020, when COVID-19 fears caused a market panic, and then the dramatic fall after the Federal Reserve stepped in with its bond-buying programs, which continue today:
Inflation breakeven rate
With a 10-year nominal Treasury trading with a yield of 1.63% at the auction’s close, this TIPS gets an inflation breakeven rate of 2.44%, high by historical standards. (You have to go back to 2013 to find inflation expectations higher than 2.5%.) This means that the reopened TIPS will out-perform a nominal 10-year Treasury if inflation averages higher than 2.44% over the next 9 years, 8 months. Think it will be higher? Buy a TIPS. Think it will be lower? Buy a nominal Treasury.
Before the auction, the trendline looked like the inflation breakeven rate would break the 2.5% barrier today. But investors backed off. From a Reuters report today:
Market expectations of a further rise in inflation would need evidence of the economy moving past full employment very, very rapidly, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC.
“We’ve probably already reached the peak level of economic activity, and that probably happened in March and April,” Ricchiuto said.
If you don’t “reach full peak employment very, very quickly, then you have to rethink, reset your overall expectations on the market,” he said.
Here is the trend in the 10-year inflation breakeven rate over the last two years, showing the remarkable surge higher since the Federal Reserve and Congress began aggressive stimulus programs in March 2020:
Reaction to the auction
The TIP ETF, which holds the full range of maturities of TIPS, was trading slightly higher all morning, but its price fell immediately after the auction’s close at 1 p.m. EDT. This is another indication of weak demand for the reopening auction.
Overall, however, this auction result looks like was in the range of “predictable.” The Treasury was adding $13 billion in new supply, and bidders wanted a slightly higher-than-market yield.
The auction closes the history of CUSIP 91282CBF7, with three auctions that all produced real yields deeply negative to inflation. The Treasury will offer a new 10-year TIPS at auction in July and then reopen that issue in auctions in September and November.
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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 purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
This is a great time to be a holder of Treasury Inflation-Protected Securities, because probably all of your longer-term holdings are more valuable today than when you purchased them. The TIP ETF, which holds the full range of maturities, had a total return of 8.4% in 2019 and then 10.8% in 2020.
That’s the good news. The bad news is that it’s not a great time to be a buyer of TIPS. Real yields — your returns against inflation — have plummeted in 2021 and once again the full range of TIPS offerings, including the 30-year, have a real yields negative to inflation.
Of course, this is the world of safe fixed-income investing in May 2021. All safe investments, including nominal Treasurys, bank CDs and TIPS, are highly likely to under-perform official U.S. inflation into the future. The only exceptions are U.S. Savings Bonds: The I Bond will have a return matching official inflation, and the EE Bond will return 3.5% if held for 20 years, and has a good shot at beating future inflation. (Compare that with the 20-year Treasury, yielding 2.25%.)
Into this environment comes Thursday’s reopening auction of CUSIP 91282CBF7, creating a 9-year, 8-month TIPS. This is its second and final reopening auction.
CUSIP 91282CBF7 was created at auction on Jan. 21, 2021, and generated a real yield to maturity of -0.987%, the lowest ever for any TIPS auction of this term. The coupon rate was set at 0.125%, and investors paid a premium price of about $111.64 for about $100.01 of par value plus accrued interest.
It was then reopened on March 18, 2021, with a more-favorable real yield to maturity of -0.580%. The price dropped to about $107.62 for about $100.73 of value, after accrued inflation and interest was added in.
CUSIP 91282CBF7 is currently trading on the secondary market, and you can track its real yield and price on Bloomberg’s Current Yields page. As of Friday’s close it was trading with a real yield of -0.92% and a price of about $110.58. So at this point the real yield still remains a bit higher than January’s record low.
This TIPS will carry an inflation index of 1.01660 on the settlement date of May 28. That’s going to raise its adjusted price by 1.66%, but investors will get a matching amount of additional principal.
Here is a look at the trend in 10-year real yields over the last decade, a period of extremely low interest rates and relatively mild inflation:
For much of the time over the last decade, the 10-year real yield has been above zero and often in a range near 0.50%. The two exceptions are times of aggressive quantitative easing by the Federal Reserve, first from 2011 to mid 2014, and again from 2020 to today. Real yields are likely to remain well below zero at least until the Fed “hints” it will taper its bond-buying programs and eventually — after much signaling — begin raising short-term interest rates.
In the meantime, the Fed has stated it will accept “average” U.S. inflation of higher than 2%. So even though U.S. inflation is currently running at 4.2%, the Fed will ignore that until average inflation — maybe over 18 months? — rises “above 2%,” implying that 2.5% will be acceptable. The market’s reaction has been to force real yields lower, even as nominal yields were increasing. Because TIPS offer inflation protection, they are a more appealing investment under this Fed policy, so they are being bid up, forcing yields lower.
Here is a comparison of the nominal yield of a 10-year Treasury note versus the real yield of a 10-year TIPS over the last decade:
The key point is to note that while the two yields tend to rise and fall together, after February 2020 they have sharply diverted, with the nominal yield rising while the real yield is falling. And that brings us to …
10-year inflation breakeven rate
A nominal 10-year Treasury is currently trading at 1.63%, and if this reopened TIPS gets a real yield of -0.92%, it will have an inflation breakeven rate of 2.55%, which would be higher than any auction result since 2016 (when I started tracking this measure). In essence, it means that inflation will have to average more than 2.55% over the next 9 years, 8 months, for this TIPS to out-perform a nominal Treasury.
I think there will be plenty of investors willing to bet that inflation will run higher than 2.55% over the next decade, and so demand for this offering should be strong, at least versus a nominal 10-year Treasury.
Here’s a look at the trend for the 10-year inflation breakeven rate over the last decade, showing the rather mind-boggling surge higher once the Federal Reserve and Congress went into “stimulus” mode in March 2020:
When you compare a TIPS to a nominal Treasury, a TIPS is more attractive as the inflation breakeven rate declines, and less attractive as the inflation breakeven rate rises. Check out my “TIPS Vs. Nominals” page for more on that.
Conclusion
Once again, my personal investment decision is to sit out this auction, with the real yield likely to be close to a record low, the breakeven rate historically high, and the investment requiring a lofty premium price over par. At some point, nominal and real yields will climb higher, and more attractive options — eventually — will be available.
For the first $10,000 you invest in inflation protection, go with Series I Savings Bonds, which have a purchase cap of $10,000 per person per year. Right now an I Bond has 92-basis-point advantage over this TIPS, while providing tax-deferred interest and better inflation protection.
If you are interested in this auction, keep an eye on Bloomberg’s Current Yields page up to the morning of the auction, which closes to non-competitive bids at noon EDT. The 10-year TIPS listed there is CUSIP 91282CBF7, and it should be an accurate predictor of your likely yield and cost. But just be aware that an auction event can sometimes skew the yield higher or lower. As I noted, I think demand could be fairly strong for this TIPS from big-money investors.
One positive factor: April’s non-seasonally adjusted inflation rate of 0.82% is going to give an immediate boost to this TIPS’ principal balance in June, up 0.82%. And adjustments in the next few months after that could also be fairly high.
I will be posting the auction results soon after the official close at 1 p.m. EDT Thursday. Here is a history of recent 9- to 10-year TIPS auctions, showing the string of negative real yields that began in May 2020:
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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 purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
For several years, I’ve been tracking the performance of TIPS investments versus nominal Treasurys of the same term. Over the last decade, TIPS have been fairly lousy investments when compared to their nominal counterparts. That’s what happens when inflation runs at surprisingly low levels for years.
On April 15, 2021, a five-year TIPS matured. This was CUSIP 912828Q60, created at auction on April 21, 2016. In my preview article for that auction, I noted that the yield to maturity was likely to be negative to inflation, and down 68 basis points from a similar auction in December 2015. The auction a few days later ended up with a real yield to maturity of -0.195%.
So, with its negative yield to inflation, this was a lousy investment, right?
Wrong. It ended up outperforming a 5-year Treasury note, which at the time had a nominal yield of 1.35%. That created an inflation breakeven rate of 1.54%, pretty attractive. In actuality, inflation ended up averaging 2.1% over the next five years, giving this TIPS a 0.56% annual advantage over the nominal 5-year Treasury.
Understand that this is a rough estimate of performance, and it is based on inflation data starting two months before the month of TIPS issue. Inflation accruals for TIPS each month are based on inflation data from two months earlier. (That means the big jumps in inflation in March and April 2021 are not reflected in this data.)
Also, keep in mind that interest on a nominal Treasury and the TIPS coupon rate is paid out as current-year income and not reinvested. So in the case of a nominal Treasury, the interest earned could be reinvested elsewhere, which would potentially boost the gain. For certain, we don’t know what the investor could have earned precisely on an investment after re-investments.
In the case of a TIPS, the inflation adjustment compounds over time, and that will give TIPS a slight boost in return that isn’t reflected in the “average inflation” numbers presented in the chart.
Nevertheless, it is clear that CUSIP 912828Q60 ended up being a winner when compared to a 5-year nominal Treasury, because inflation ended up running higher than its rather low inflation breakeven rate.
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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 purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
Memo to inflation predictors: You are going to need some new formulas.
The Consumer Price Index for All Urban Consumers increased 0.8% in April on a seasonally adjusted basis after rising 0.6% in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all-items index increased 4.2%, the largest 12-month increase since a 4.9% increase in September 2008.
This result was four times the consensus estimate of 0.2% for April inflation, and the year-over-year number was also much higher than the estimate of 3.6%. Core inflation, which removes food and energy, was equally shocking: 0.9% for the month, versus an estimate of 0.3%, and 3.0% for the year, versus an estimate of 2.3%.
Clearly, economists have no way to predict U.S. inflation accurately in mid 2021, after 13 months of massive Federal Reserve and Congressional stimulus measures. And this came in a month when gasoline prices — usually a key trigger of monthly inflation — actually fell!
Here are some highlights from the BLS report:
The index for used cars and trucks rose 10.0% in April, the largest monthly increase in that category since this inflation series began in 1953. Used vehicle prices are up a massive 21% over the last 12 months.
Food prices rose 0.4% for the month and are up 2.4% year over year.
Gasoline prices fell 1.4% in April after rising 9.1% in March, but remain 47.6% higher year over year.
The shelter index rose 0.4% in April, and is up 2.1% over the year.
The index for airline fares also rose sharply in April, increasing 10.2%.
Costs of car and truck rentals rose 16.2%.
The costs of medical care services remained flat in April, and are up 2.2% year over year.
My takeaway from the April report is that inflation is surging across the entire economy, at a rate much higher than economists expected. And that happened even though gas prices were down for the month. Gasoline prices have already risen sharply in May, partially triggered by the East Coast pipeline shutdown.
Here is the trend over the last 12 months for both all-items and core inflation, showing the relatively moderate trend during the heart of the COVID-19 pandemic, but surging once the nation began reopening earlier this year:
What this means for TIPS and I Bonds
Investors in Treasury-Inflation Protected Securities and U.S. Series I Bonds are also interested in non-seasonally adjusted inflation, which is used to adjust principal balances on TIPS and set future interest rates for I Bonds. For April, the BLS set the inflation index at 267.054, an increase of 0.82% over the March number.
For TIPS. Today’s inflation report means that principal balances for all TIPS will increase by 0.82% in June, following increases of 0.55% in April and 0.71% in May. That’s a remarkable 2.07% increase in three months, and a nice demonstration of why it’s smart to have some inflation protection in your asset allocation. Here are the new June Inflation Indexes for all TIPS.
For I Bonds. Today’s report is the first of a six-month string that will determine the I Bond’s new inflation-adjusted variable rate, which will be reset in November. It’s too early to draw any conclusions, and remember that today’s report shows just how difficult inflation is to predict.
Here are the numbers:
What this means for future interest rates
The Federal Reserve has been predicting a “transitory” increase in inflation, caused partially by comparisons to the weak price trend during the early months of the COVID-19 pandemic. Note in the chart above that non-seasonally adjusted prices fell 0.67% in April 2020, followed by zero inflation in May 2020. In addition, the nation is facing some supply shortages in key items like lumber and computer chips.
The stock market isn’t reacting well to today’s news, with the S&P 500 index down nearly 1% this morning. The 10-year Treasury yield has bounced back to about 1.67%, up about 9 basis points over the last week.
But will this surge in inflation continue? From today’s Wall Street Journal report:
“I think a lot of us are expecting a pretty significant increase of spending on services in the next couple months and that’s where a lot of the pressure on CPI is going to come from,” said Richard F. Moody, chief economist at Regions Financial Corp. “It’s a question of how long that burst in spending persists. And the longer it persists, the more latitude producers have to raise prices.” …
A persistent, significant increase in inflation could prompt the central bank to tighten its easy-money policies earlier than it had planned, or to react more aggressively later, to achieve its 2% inflation goal.
Because of the weak inflation numbers in May 2020, it’s likely that core inflation will again be 3.0% or higher in the May 2021 report, well above the Fed’s stated target of “above 2.0%.” The Fed tracks a different inflation index, the Personal Consumption Expenditures index, which was 2.3% in March (the April number has not yet been released).
The Fed, however, believes this inflationary trend will be temporary, with price increases probably settling in around 2.5% by the end of the year. A few more months of the outsized inflation of March and April may force them to change their view.
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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 purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
I know most of my readers are experienced investors who already have a TreasuryDirect account. If you know a less-experienced investor who could use this information, please pass it along. Thanks …
By David Enna, Tipswatch.com
The news that U.S. Series I Savings Bonds are now paying 3.54%, annualized, for six months is drawing a lot of attention from new investors, people who a few months ago would have laughed off any talk of investing in savings bonds.
This is good. I love when people learn about I Bonds and EE Bonds and appreciate them as valuable and viable investments. Yes, they are “relics” from the past, but that relic status is what makes them so attractive: They have terms that create a flow of interest income much higher than you’d find with any other “modern” safe investment.
But then there is the obvious question: How do you invest in I Bonds? You could ask your broker, but don’t expect any help there. Your broker can’t sell you I Bonds, and can’t make money from advising you to buy them. You can’t buy them on the “open market.” There is only one place to purchase I Bonds, and that is the U.S. government’s site, TreasuryDirect.gov.
What do you need to open an account?
An image from the TreasuryDirect site. Five minutes? Possibly wishful thinking.
A taxpayer identification number … in other words, a Social Security Number.
A United States address of record. Do you need to be a U.S. citizen? No. Do you need to be living in the U.S.? No. But you need a U.S. address to register the account.
Be at least 18 years old. A child cannot open a TreasuryDirect account. But a parent or other adult guardian can open an account for a child and link it to the adult’s account.
A checking or savings account … this can be at a physical or online bank, or at brokerage, such as Fidelity or Vanguard. You will need to know your account and routing numbers.
An email address.
A web browser that supports 128-bit encryption. TreasuryDirect states that its site is “optimized for Internet Explorer,” which is classic government dumbness. IE has been replaced by Microsoft Edge and today has a market share of less than 1%. TreasuryDirect even provides “helpful” links to Windows XP service packs that have long-ago been discontinued. TreasuryDirect works fine with Firefox and Chrome browsers. I have tested it with Edge and Safari, too, and it seems to work fine.
When you get to the “Account Type” page, choose “Individual.” (You can also open an account in the name of a trust, but I have no idea how that works.)
A married couple must open two separate TreasuryDirect accounts if both spouses wish to purchase I Bonds. Each account is limited to purchasing $10,000 per person per calendar year, so if you want to purchase $20,000 in a year, you need two accounts.
(There are separate purchase caps for I Bonds and EE Bonds, so an individual can buy $10,000 of both, for a total of $20,000. EE Bonds, by the way, are also an excellent 20-year investment in today’s market. I wrote about that in September 2019.)
Once you get to TreasuryDirect’s “Individual Account Application” page, you’ll need to fill in a lot of personal information — see why you need that 128-bit encryption? — including your Social Security number, date of birth, state driver’s license number and expiration date, mailing address, email address, and bank information.
Then, TreasuryDirect will ask you to select a “personalized image and caption.” What’s this about? It is a safeguard against phishing attempts. If a scammer tries to get you to log into your TreasuryDirect account using a false address, you won’t see this image and caption. That’s a signal you are being scammed.
Next, you will choose your password. TreasuryDirect advises, “When selecting your password, avoid numbers, names and dates” that correspond to your personal information. I suggest creating a password that is UNIQUE to TreasuryDirect and not used elsewhere.
You’ll also be asked to answer three security questions, in case you forget your unique password. Favorite author? Favorite movie? And so on.
And that is it, on the last page of the account creation screens, you will be given your new account number (usually something like X-123-456-789). When you go to log later, you will be asked to provide your account number and password. As an additional security measure, you will be emailed a temporary security code to enter before you gain access to your account.
Registering your purchases
How you register a savings bond determines who owns the bond and who can cash it. The registration also determines what happens with the bond if the owner dies.
One owner. Only one person is named as owner. Only that person can make transactions. If he or she dies, the bond becomes part of the estate.
Owner and beneficiary. Only the owner can make transactions. If he or she dies, the beneficiary becomes the only owner. The beneficiary can’t be an entity. The registration says “PAYABLE ON DEATH,” or “POD.” Example of registration: JOHN DOE POD TO JANE DOE
Two owners. For electronic bonds (the only option when buying through TreasuryDirect), the first-named owner is the primary owner; the second is secondary. The registration uses “WITH.” An example of this registration is JOHN DOE SSN 987-65-4321 WITH JANE DOE SSN 123-45-6789. If one owner dies, the other becomes sole owner. If one owner is a person, the other can’t be an entity like a trust.
These ownership rules throw a lot of investors for a loop, because they expect to see “Joint Ownership With Right of Survivorship” as an option. How is “with” ownership different from “joint ownership”? I don’t know, but for a married couple, I’d recommend using this “with” ownership, which should avoid issues after the primary owner’s death.
Using I Bonds for higher education
If you use interest from a Series I bond to pay for higher education, you may not have to pay federal tax on the interest. However:
If you want to use the bond for your education, you must be the owner of the bond.
If you want to use the bond for your child’s education, then you or your spouse, or both, must own the bond. Your child may be a beneficiary but not a co-owner.
Your modified adjusted gross income has to be less than the cut-off amount set by the Internal Revenue Service. This amount typically changes every year. I believe the current caps are $84,950 for single taxpayers and $134,900 for married filing jointly, but a gradual phaseout of the benefit begins at lower income levels. See IRS Publication 970 “Tax Benefits for Education.”
Logging in for the first time
When you first log in, you will enter your account number (it looks something like X-123-456-789) and then you will get a notice that you must go to your connected email account for a one-time security code. Copy and paste that code into the box, submit, and you will come to the password entry page.
This is another security step. You enter your password using a virtual keyboard (it ignores upper and lower case). This security measure will keep keystroke-tracking viruses from learning your password. But you can see why you don’t want a 23-letter-long password. Keep it unique, and reasonable.
Here are the Treasury’s official password rules:
Length. Use at least eight characters without spaces.
Characters. Use at least one letter, one number, and one special character such as $ or %, but excluding “\”.
Content. Avoid numbers, names, or dates that are significant to you. For example, your phone number, first name or date of birth. Try to choose a password based on a memory aid.
On this page, above the keyboard, you will also see the image and caption you selected in the registration pages.
Making your first purchase
After you complete the login process, you will see your account summary page, which should be pretty empty if this is your first purchase. Up in the top row of links, click on “BuyDirect” and you will go to the purchasing menu.
Select Series I
On the next page, your preferred registration should be filled in, such “Person1” or “Spouse1 WITH Spouse 2”
Enter the purchase amount, up to $10,000 per account per calendar year.
Select the source of funds, which should already be filled in once your link to your bank or brokerage is completed.
If you select a single purchase, you can select the date for the purchase to be completed. I recommend setting a date near the end of the month, but on a weekday. For example, for this month, I’d probably select May 27, a Thursday. (An I Bond purchased late in a month earns a full’s month’s interest.)
Submit.
At this point you should see a confirmation of your purchase, but since I’ve already purchased my 2021 allocation, I can’t complete the process to test it.
How do I track/sell my holdings?
TreasuryDirect isn’t really like a brokerage account where you can check the current value of your holdings on a simple “balances” page. When you go to the account summaries page, you will see a value listed, but it is actually the original value of the I Bonds you purchased. If you click on “Savings Bonds” on that list, you go to another page, where you can select “Series I Savings Bonds” and hit submit.
On the next page — titled “Current Holdings > Summary” — you can see a list of your holdings and the “issue date,” “interest rate” and “current value,” which reflects interest paid up to that point. If you click on an individual issue and “select,” you will see at the bottom a link to redeem that savings bond.
When you redeem, you can sell the full amount (including interest accrued), or a partial amount, and you designate the bank account that will receive the funds. TreasuryDirect says you should receive the money in two business days.
(Keep in mind that you must hold an I Bond for 12 months before redeeming, and if you redeem before 5 years you will forfeit the last three months of interest.)
The Treasury also provides a web-based Savings Bond Calculator that it says are for paper bonds only, but in actuality can be used to track and list the electronic version, too. Back in January 2018 I wrote a step-by-step guide to using this calculator. Hint: It’s clunky.
How secure is TreasuryDirect?
This is source of rather heated debates on the Bogleheads forums, because the Treasury makes no “stated” commitment to guarantee your account against hacking or theft. For that reason, some investors will not purchase any holdings in TreasuryDirect. And this debate has been going on for more than a decade.
While the Treasury seems to dodge the “security guarantee” question, I feel strongly that it would take responsibility for any errors/hacking that it caused. But if you fall for a clever phishing attack or have an evil relative, you could face losses. The system does send you email alerts for any account changes, such as in registrations or linked bank accounts, or even if the email address was changed.
The Treasury expects you to monitor your account and provide timely notice of any irregularities. I think the risk is extremely small, and I have not heard of anyone ever losing money through hacking or theft. The complex login system that TreasuryDirect uses, including the two-factor verification and virtual keyboard, add up to strong security.
As an added security feature, TreasuryDirect allows you to place a hold on your account. If you believe someone else has learned your account access information and you want to prevent unauthorized access, you can edit your Account Info in your primary account to place a Customer Hold. This action will prohibit all transactions associated with your primary and linked accounts. After you place your Customer Hold, you will not have access to your account until the hold is removed.
What happens at tax time?
Not much. TreasuryDirect doesn’t have a “user-friendly” attitude when it comes to tax documents. It may (or may not) send you an email reminder to log in and check your current documents. It will not physically mail you anything. When you locate your tax documents, you’ll find the format to be confusing and not-printer friendly.
Of course, with I Bonds, you won’t owe any federal taxes until you redeem a bond, and I Bond interest is exempt from state income taxes. So this isn’t a big deal for an I Bond investor. But if you redeem some bonds, you will have a tax obligation that year and you’ll need to track down the forms.
Conclusion
No one is going to extol TreasuryDirect for being “user friendly,” and some of the complexities arise because of the extra security steps it places in the way of logins. Can you open an account in 5 minutes? I’d bet against that. And there could be some time needed to verify your bank account before you can make a purchase.
If you have more questions, post them below. I might not be able to answer some of the more complex or legal issues, but possibly other readers have some experience in those areas.
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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 purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
Treasury Inflation-Protected Securities 
David, Thanks for the heads-up and I bought through my brokerage and am pleased with a nearly 2% real yield.…