New I Bond Rate - May 1, 2015
Moderator: Global Moderator
New I Bond Rate - May 1, 2015
Fixed Rate = 0.00%
Inflation Rate = -0.80%
Composite rate = 0.00%
Inflation Rate = -0.80%
Composite rate = 0.00%
“Let every man divide his money into three parts, and invest a third in land, a third in business and a third let him keep by him in reserve.� ~Talmud
Re: New I Bond Rate - May 1, 2015
OMG, I just bought a bunch of those I-Bonds! No better than my Credit Union, and less liquid!
Re: New I Bond Rate - May 1, 2015
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.
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
I thought CPI excluded energy prices?
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Re: New I Bond Rate - May 1, 2015
Me too. I remember some of our convo about that back then. I went with 3-YR treasury notes.sophie wrote: Yikes. Glad I skipped buying i bonds last year...
Remember all the hoopla about TIPS at bogleheads' forum?
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Re: New I Bond Rate - May 1, 2015
I think that's called "core CPI" (less food and energy).Pointedstick wrote: I thought CPI excluded energy prices?
Yes, TIPS owners must be crying their eyes out right now.
"Democracy is two wolves and a lamb voting on what to have for lunch." -- Benjamin Franklin
Re: New I Bond Rate - May 1, 2015
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
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.
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Re: New I Bond Rate - May 1, 2015
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?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.
Re: New I Bond Rate - May 1, 2015
Corporations can't have huge piles of paper money lying around.
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Re: New I Bond Rate - May 1, 2015
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
Right! What you said!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.
Re: New I Bond Rate - May 1, 2015
Dude, you've been here long enough to understand real vs. nominal return.barrett wrote: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?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.
Re: New I Bond Rate - May 1, 2015
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.dragoncar wrote:Dude, you've been here long enough to understand real vs. nominal return.barrett wrote: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?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.
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Re: New I Bond Rate - May 1, 2015
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.
…Which is still really low, but it's not negative.
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Re: New I Bond Rate - May 1, 2015
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!Bean wrote: Fixed Rate = 0.00%
Inflation Rate = -0.80%
Composite rate = 0.00%
Re: New I Bond Rate - May 1, 2015
I suppose better than a money market fund that breaks the buck.