New I Bond Rate - May 1, 2015

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Bean
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New I Bond Rate - May 1, 2015

Post by Bean » Fri May 01, 2015 1:14 pm

Fixed Rate = 0.00%
Inflation Rate = -0.80%
Composite rate = 0.00%


:'(
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ochotona
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Re: New I Bond Rate - May 1, 2015

Post by ochotona » Fri May 01, 2015 2:33 pm

OMG, I just bought a bunch of those I-Bonds! No better than my Credit Union, and less liquid!
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Re: New I Bond Rate - May 1, 2015

Post by sophie » Fri May 01, 2015 2:34 pm

Yikes.  Glad I skipped buying i bonds last year...

It's also strange to see outright deflation with negative interest rates on T-bills, while yields on long bonds are increasing.  It looks like the price deflation was almost entirely due to the drop in oil prices.  Kinda sucks for me because about the only consumer item that's actually dropped in price is gasoline, which is the one thing I have little use for.  The reduction in oil prices was not reflected anywhere else, it seems.  Someone is making out like a bandit.
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Re: New I Bond Rate - May 1, 2015

Post by Pointedstick » Fri May 01, 2015 2:46 pm

I thought CPI excluded energy prices?
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Re: New I Bond Rate - May 1, 2015

Post by dualstow » Fri May 01, 2015 2:49 pm

sophie wrote: Yikes.  Glad I skipped buying i bonds last year...
Me too. I remember some of our convo about that back then. I went with 3-YR treasury notes.

Remember all the hoopla about TIPS at bogleheads' forum?
Feels like the end of the everything rally.
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sophie
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Re: New I Bond Rate - May 1, 2015

Post by sophie » Fri May 01, 2015 3:05 pm

Pointedstick wrote: I thought CPI excluded energy prices?
I think that's called "core CPI" (less food and energy).

Yes, TIPS owners must be crying their eyes out right now. 
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Re: New I Bond Rate - May 1, 2015

Post by dragoncar » Fri May 01, 2015 4:33 pm

Why the sad face?  .8% real is better than 0% real!  I thought people were glad Ibonds couldn't go negative for just this reason.
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Re: New I Bond Rate - May 1, 2015

Post by dualstow » Fri May 01, 2015 5:42 pm

I want to give credit to Moda, btw. I got the idea to buy those notes from a post he wrote a long time ago.
Feels like the end of the everything rally.
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Re: New I Bond Rate - May 1, 2015

Post by barrett » Fri May 01, 2015 6:20 pm

dragoncar wrote: Why the sad face?  .8% real is better than 0% real!  I thought people were glad Ibonds couldn't go negative for just this reason.
The composite rate of return on new bonds is 0%, not .8%. Can someone explain to me why anyone would lend the government money for nothing in return? Safer than a bank? A mattress?
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Re: New I Bond Rate - May 1, 2015

Post by ochotona » Fri May 01, 2015 6:25 pm

Corporations can't have huge piles of paper money lying around.
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Re: New I Bond Rate - May 1, 2015

Post by Pointedstick » Fri May 01, 2015 6:57 pm

Corporations can't buy I-bonds, I don't believe, but the principle is the same for things they can buy, like T-bills.
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Re: New I Bond Rate - May 1, 2015

Post by ochotona » Fri May 01, 2015 7:13 pm

Pointedstick wrote: Corporations can't buy I-bonds, I don't believe, but the principle is the same for things they can buy, like T-bills.
Right! What you said!
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Re: New I Bond Rate - May 1, 2015

Post by dragoncar » Fri May 01, 2015 7:46 pm

barrett wrote:
dragoncar wrote: Why the sad face?  .8% real is better than 0% real!  I thought people were glad Ibonds couldn't go negative for just this reason.
The composite rate of return on new bonds is 0%, not .8%. Can someone explain to me why anyone would lend the government money for nothing in return? Safer than a bank? A mattress?
Dude, you've been here long enough to understand real vs. nominal return.
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Re: New I Bond Rate - May 1, 2015

Post by barrett » Fri May 01, 2015 8:15 pm

dragoncar wrote:
barrett wrote:
dragoncar wrote: Why the sad face?  .8% real is better than 0% real!  I thought people were glad Ibonds couldn't go negative for just this reason.
The composite rate of return on new bonds is 0%, not .8%. Can someone explain to me why anyone would lend the government money for nothing in return? Safer than a bank? A mattress?
Dude, you've been here long enough to understand real vs. nominal return.
Right you are. I guess that mental leap to think of a 0% return actually being better than -.8% deflation was just a bit much for me. Forgive me. I have recovered. Have to learn to think like a Japanese or European investor.
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Re: New I Bond Rate - May 1, 2015

Post by Pointedstick » Fri May 01, 2015 8:26 pm

Looking at http://www.bls.gov/cpi/cpid1503.pdf, it seems like Sophie's right. Excluding food and energy, 1-year CPI is actually +1.8%.

…Which is still really low, but it's not negative.
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Re: New I Bond Rate - May 1, 2015

Post by Desert » Sat May 02, 2015 6:16 am

Pointedstick wrote: Looking at http://www.bls.gov/cpi/cpid1503.pdf, it seems like Sophie's right. Excluding food and energy, 1-year CPI is actually +1.8%.

…Which is still really low, but it's not negative.
I'm not sure if I'm just repeating the point you made here, but just in case there is confusion: I-bonds and TIPS are based on the CPI-U, which includes food and energy. 

Hyper inflation porn folks like to talk about the core CPI, seemingly to intentionally mislead, saying things like "the CPI includes everything except stuff that's goin' up, like food and energy!" 
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Re: New I Bond Rate - May 1, 2015

Post by Pet Hog » Sat May 02, 2015 2:11 pm

Bean wrote: Fixed Rate = 0.00%
Inflation Rate = -0.80%
Composite rate = 0.00%


:'(
In case anyone is unaware of how I-Bond rates are calculated, this inflation rate is for the six months from September to March.  Annualized, it's –1.60%.  Even better real return at 0% nominal!
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Re: New I Bond Rate - May 1, 2015

Post by ochotona » Sat May 02, 2015 4:39 pm

I suppose better than a money market fund that breaks the buck.
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