Welcome to City-Data.com Forum!
U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 07-05-2022, 05:07 PM
 
Location: Occupant of USA.
938 posts, read 423,489 times
Reputation: 1304

Advertisements

Quote:
Originally Posted by SuiteLiving View Post
Rate resets every 6 months
Thanks but. From the website I'm seeing this.

Fixed rate
You know the fixed rate of interest that you will get for your bond when you buy the bond. The fixed rate never changes.

Now, I'm a little confused in your reply.
Reply With Quote Quick reply to this message

 
Old 07-05-2022, 05:16 PM
 
2,746 posts, read 1,780,424 times
Reputation: 4438
Quote:
Originally Posted by StillinICT View Post
Thanks but. From the website I'm seeing this.

Fixed rate
You know the fixed rate of interest that you will get for your bond when you buy the bond. The fixed rate never changes.

Now, I'm a little confused in your reply.
The fixed rate is 0%, the inflation rate resets every 6 months.

How does Treasury figure the I bond interest rate?
The interest on I bonds is a combination of

fixed rate
inflation rate
Fixed rate
You know the fixed rate of interest that you will get for your bond when you buy the bond. The fixed rate never changes.

Treasury announces the fixed rate for I bonds every six months (on the first business day in May and on the first business day in November). The fixed rate then applies to all I bonds issued during the next six months.

The fixed rate is an annual rate.

Inflation rate
The inflation rate can, and usually does, change every six months.

We set the inflation rate every six months (on the first business day of May and on the first business day of November), based on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy.

However, the change is applied to your bond every six months from the bond's issue date. (The dates for these changes might not be May 1 and November 1.) When does my bond change rates?

Combining the two rates
To get the actual rate of interest (sometimes referred to as the composite or earnings rate) we combine the fixed rate and the inflation rate, using the equation in the example below.

The combined rate will never be less than zero. However, the combined rate can be lower than the fixed rate. If the inflation rate is negative (because we have deflation, not inflation), it can offset some of the fixed rate.
If the inflation rate is so negative that it would pull the combined rate below zero, we don't let that happen. We stop at zero.
An example
The composite rate for I bonds issued from May 2022 through October 2022 is 9.62%
Here's how we set that composite rate:

Fixed rate

0.00%

Semiannual inflation rate

4.81%

Composite rate = [fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)]



[0.0000 + (2 x 0.0481) + (0.0000 x 0.0481)]

Composite rate



[0.0000 + 0.0962 + 0.0000000]

Composite rate



0.0962000

Composite rate



0.09620

Composite rate



9.62%

When does my bond change rates?
Issue month of your bond New rates take effect
January January 1 and July 1
February February 1 and August 1
March March 1 and September 1
April April 1 and October 1
May May 1 and November 1
June June 1 and December 1
July July 1 and January 1
August August 1 and February 1
September September 1 and March 1
October October 1 and April 1
November November 1 and May 1
December December 1 and June 1
What have rates been in the past?
Our Series I bond rate chart shows in one table all past and current rates--fixed rates, inflation rates, and composite rates.

The two tables below show fixed rates and inflation rates, respectively.

Fixed rates
The fixed rate set each May and November applies to all bonds we issue in the six months following the date when we set the rate. The fixed rate applies for the life of the bond.

Date the fixed rate was set Fixed rate for bonds issued in the six months after that date
May 1, 2022 0.00%
November 1, 2021 0.00%
May 1, 2021 0.00%
November 1, 2020 0.00%
May 1, 2020 0.00%
November 1, 2019 0.20%
May 1, 2019 0.50%
November 1, 2018 0.50%
May 1, 2018 0.30%
November 1, 2017 0.10%
May 1, 2017 0.00%
November 1, 2016 0.00%
May 1, 2016 0.10%
November 1, 2015 0.10%
May 1, 2015 0.00%
November 1, 2014 0.00%
May 1, 2014 0.10%
November 1, 2013 0.20%
May 1, 2013 0.00%
November 1, 2012 0.00%
May 1, 2012 0.00%
November 1, 2011 0.00%
May 1, 2011 0.00%
November 1, 2010 0.00%
May 1, 2010 0.20%
November 1, 2009 0.30%
May 1, 2009 0.10%
November 1, 2008 0.70%
May 1, 2008 0.00%
November 1, 2007 1.20%
May 1, 2007 1.30%
November 1, 2006 1.40%
May 1, 2006 1.40%
November 1, 2005 1.00%
May 1, 2005 1.20%
November 1, 2004 1.00%
May 1, 2004 1.00%
November 1, 2003 1.10%
May 1, 2003 1.10%
November 1, 2002 1.60%
May 1, 2002 2.00%
November 1, 2001 2.00%
May 1, 2001 3.00%
November 1, 2000 3.40%
May 1, 2000 3.60%
November 1, 1999 3.40%
May 1, 1999 3.30%
November 1, 1998 3.30%
September 1, 1998 3.40%
Reply With Quote Quick reply to this message
 
Old 07-05-2022, 05:54 PM
 
Location: Occupant of USA.
938 posts, read 423,489 times
Reputation: 1304
Well, just like the government. Clear as mud, no surprise I guess. That's why I have questions.

So, I buy an I-bond tomorrow at a "fixed" rate of 9.62.

Does the 9.62 EVER go any lower THAN 9.62 during the term I OWN the bond? For up to 30 years?
Reply With Quote Quick reply to this message
 
Old 07-05-2022, 06:49 PM
 
2,746 posts, read 1,780,424 times
Reputation: 4438
Quote:
Originally Posted by StillinICT View Post
Well, just like the government. Clear as mud, no surprise I guess. That's why I have questions.

So, I buy an I-bond tomorrow at a "fixed" rate of 9.62.

Does the 9.62 EVER go any lower THAN 9.62 during the term I OWN the bond? For up to 30 years?
No, you buy at a “fixed rate” of 0%, that will never change.

The variable rate is 9.62% currently. That rate will reset every 6 months.
Reply With Quote Quick reply to this message
 
Old 07-06-2022, 04:43 AM
 
6,769 posts, read 5,483,802 times
Reputation: 17641
Quote:
Originally Posted by organic_donna View Post
I received about 20 paper bonds in different denominations. I had to input the numbers and amount of each bond on the website. That took a while. Then I had to mail in the paper bonds to have them converted. It was an ordeal.
Most likely to keep people avoiding adding the extra $5k in refund added bonds above the $10k allowable.

Best
Reply With Quote Quick reply to this message
 
Old 07-08-2022, 10:00 AM
 
Location: Boston
2,435 posts, read 1,319,216 times
Reputation: 2126
Quote:
Originally Posted by MadManofBethesda View Post
Well, there's a very simple reason for that. There's been a huge difference in the interest rates they paid.

As you know, the current interest rate (expressed annually) is 9.62%. Earlier this year, from Jan-Apr, although lower, it was still 7.12%. Do you know what it was in 2020?

Here are the rates that were available then:

01/01/20 - 04/30/20: 2.22%
05/01/20 - 10/31/20: 1.06%
11/01/20 - 12/31/20: 1.68%

Would you have bought I Bonds at those rates? Neither would I. Conversely, who wouldn't want to buy bonds paying 9.62%? That's why so many more have been purchased in 2022.
Maybe I'm misunderstanding how I bonds work, but isn't the 9.62% rate limited to the current 6-month period? The chances of rates falling back to earth in 2023 is fairly high, so one ends up with a $10k bond that pays 9.62% interest for 5% of the bond's life and then will likely be back toward 1-2% for the remainder. Redeeming early and eating the penalty may still result in a small gain, but we're talking a few hundred on a $10k investment.

That is to say, I'm not sure why so many more people are flocking to these. The return is marginal in the long-term, and parking that money in the stock market for 10 years is still likely to win out.
Reply With Quote Quick reply to this message
 
Old 07-08-2022, 11:29 AM
 
2,019 posts, read 1,312,131 times
Reputation: 5076
Quote:
Originally Posted by StillinICT View Post
Well, just like the government. Clear as mud, no surprise I guess. That's why I have questions.

So, I buy an I-bond tomorrow at a "fixed" rate of 9.62.

Does the 9.62 EVER go any lower THAN 9.62 during the term I OWN the bond? For up to 30 years?

Just to be clear, the fixed rate is zero % right now, and the highest it has ever been is 3.6% back in year 2000.
For the last 10 years, the fixed has stayed between zero and a half percent.

I-bonds can and have gone to zero percent. Back in 2009 when the cpu was negative 2.78%, all I-bonds went to zero percent regardless of their fixed rate
Here's the historical chart
https://www.treasurydirect.gov/indiv...dratechart.pdf
Reply With Quote Quick reply to this message
 
Old 07-08-2022, 11:49 AM
 
Location: Occupant of USA.
938 posts, read 423,489 times
Reputation: 1304
Quote:
Originally Posted by id77 View Post
Maybe I'm misunderstanding how I bonds work, but isn't the 9.62% rate limited to the current 6-month period? The chances of rates falling back to earth in 2023 is fairly high, so one ends up with a $10k bond that pays 9.62% interest for 5% of the bond's life and then will likely be back toward 1-2% for the remainder. Redeeming early and eating the penalty may still result in a small gain, but we're talking a few hundred on a $10k investment.

That is to say, I'm not sure why so many more people are flocking to these. The return is marginal in the long-term, and parking that money in the stock market for 10 years is still likely to win out.
I tend to agree with your statement. Under current conditions one could get a few six months run before it flattens out again. After that, who knows.
Reply With Quote Quick reply to this message
 
Old 07-08-2022, 12:40 PM
 
11,175 posts, read 16,011,701 times
Reputation: 29925
Quote:
Originally Posted by id77 View Post
That is to say, I'm not sure why so many more people are flocking to these. The return is marginal in the long-term, and parking that money in the stock market for 10 years is still likely to win out.
That's completely irrelevant. This isn't "stock market money." This product is for the portion of one's portfolio that is invested in fixed income. Unless you're insanely aggressive, or young and investing for retirement, you need to have a diversified portfolio, and fixed income products such as bonds should be a part of that portfolio.
Reply With Quote Quick reply to this message
 
Old 07-08-2022, 12:53 PM
 
Location: Boston
2,435 posts, read 1,319,216 times
Reputation: 2126
Quote:
Originally Posted by MadManofBethesda View Post
That's completely irrelevant. This isn't "stock market money." This product is for the portion of one's portfolio that is invested in fixed income. Unless you're insanely aggressive, or young and investing for retirement, you need to have a diversified portfolio, and fixed income products such as bonds should be a part of that portfolio.
I don't disagree, but that's also not really what we're seeing.

Per the OP, I bond purchases have gone from 364 million in all of 2020 to 17.5 billion in half of 2022. Extrapolating that over the course of a year, that's nearly a 100x (or almost 10,000%) increase. Those aren't people with diversified portfolios moving some of their fixed income holdings into I bond numbers, those are people pulling out of other investments and/or putting emergency cash into I bonds numbers.

So, yes, I do in fact contend that at least some percentage of these buys are "stock market money" that people are putting in.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics
Similar Threads

All times are GMT -6.

© 2005-2024, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top