If you're going to get Ibonds, do it before April 27, after that, rates nosedive

[progree]

Buyers rush to get in on I savings bonds before rates plummet in May of 2023, USA Today, 4/18/23

If you buy I Bonds issued in April, you'll lock in the attractive 6.89% that applies for six months after your purchase

If you wait, you'll likely start out with an annualized rate of 3.79% for inflation-indexed bonds issued from May through October, according to Daniel Pederson, a Michigan-based savings bond expert and founder of www.BondHelper.com. We won't know the exact rate until May 1 when the Treasury's Bureau of the Fiscal Service announces the new rates.

... Buying an I Bond before April 27 means you could end up with an annualized rate of around 5.34% for the first 12 months. With compounding it would inch up, closer to 5.39%. The actual rate could be higher or lower. As I reported in an earlier column in March, April 27 is the last day someone can purchase an I Bond and have it issued by April 30,

[but consider alternatives] Several online banks for instance are offering one-year certificates of deposit with annual percentage yields between 5% and 5.25%, said Ken Tumin, who founded DepositAccounts which is now part of LendingTree. The site tracks and compares bank rates. Several brick-and-mortar banks and credit unions are also running promotional CDs with terms around one year and rates above 4%.

MORE: https://www.msn.com/en-us/money/markets/buyers-rush-to-get-in-on-i-savings-bonds-before-rates-plummet-in-may-of-2023/ar-AA1a19Cr

Warning: some banks are cutting their CD rates a bit, you might think about locking in a 3 year or 5 year or longer.

When comparing, remember that a CD in a taxable account is taxed by both federal, state, and local. Whereas an Ibond is taxed by federal, but not by state or local. (I don't think you can have an IBond in an IRA or 401k)

The purchase of Ibonds directly is limited to $10,000 / year. There's also an option of buying an additional $5,000 with your tax refund, but that ship has sailed, at least as far as getting the 6.89% rate.

Always remember that the Ibond rate you land is good only for 6 months. After that, it gets a new rate every 6 months.

And you canNOT sell/redeem/whatever an Ibond for an entire year, no matter what, no matter your circumstances. After that, its a 3 months interest penalty for redeeming before 5 years, which isn't bad (some people go crazy at the idea of paying a penalty, even though it usually only reduces their effective rate only marginally).

[mahatmakanejeeves]

1. I bonds expected to lose their luster in May as yield falls

Last edited Thu Apr 20, 2023, 08:31 AM - Edit history (1)

Yahoo Finance

I bonds expected to lose their luster in May as yield falls

Kerry Hannon · Senior Columnist
Wed, April 19, 2023 at 5:21 PM EDT

The Treasury Department’s inflation-protected I bonds, which were wildly sought after last year, won’t be in such hot demand when the rate resets for purchases made from May to October.

Analysts expect the annualized yield for an I bond to sink to 3.79% for the period from May to October from the current 6.89%.

“The huge surge in popularity of I bonds was triggered by six-month inflation-adjusted variable rates of 7.12%, 9.62%, and then 6.48% — at a time when other safe investments were paying something like 1% or less,” Dave Enna, founder of Tipswatch.com, a blog that tracks inflation-protected investments, told Yahoo Finance. “Now that has changed.”

Still, there’s time to buy these ultra-safe investments before the rate resets, experts say, but Americans should also consider the few downsides, especially as yields on other, similarly less risky investments improve.

{snip}

[progree]

2. TipsWatch.com - sounds interesting. I bought over 100 TIPs bonds on the secondary

market in November, and just got my first semi-annual coupon payment. It was a little less than expected. I thought I had it all figured out (after many hours, https://www.democraticunderground.com/11214418 ), I guess not, so I'll be digging into what happened.

Tipswatch.com, a blog that tracks inflation-protected investments

[mahatmakanejeeves]

3. I bought up to the limit just before the rates dropped several months back.

That was at Treasury Direct. I didn't know that there was a secondary market for those.

And good morning.

[progree]

4. I was talking TIPs which is different than I-bonds, am hoping that TipsWatch will explain

things to me if I don't figure it out by myself first.

TIPS (Treasury Inflation-Protected Securities) can be bought new at TreasuryDirect.com, but one typically has to wait weeks for the next auction. There is no secondary market at TreasuryDirect. I bought my TIPS at the Vanguard website.

(In contrast, I-bonds can only be bought at TreasuryDirect -- I also don't think there's a secondary market there or anywhere)

https://www.investopedia.com/terms/t/tips.asp#:~:text=What%20Are%20Treasury%20Inflation%2DProtected,purchasing%20power%20of%20their%20money.

TIPS can be bought in unlimited quantities either way.

Sorry to cause confusion or go off-topic, but well, so that people know there is another option besides I-bonds to get a Treasury-something that is inflation-protected. And in unlimited quantities. But they don't have eye-popping interest rates, just inflation plus almost 2% (that was the case in November anyway)

Edited to add TIPS can also be invested in via mutual funds and ETFs. But since funds never mature and the value just goes up and down and up and down forever, that just isn't my cup of tea. I purchased individual TIPS bonds at the Vanguard website in November, not a mutual fund or ETF. They are 30 year bonds that mature in 5.4 years (as of last November when I purchased them, now they are 5 years from maturity)/END EDIT

I also bought the max amount of I-bonds in 2022 and 2023.

And likewise, good morning

[mahatmakanejeeves]

5. Oh, I misread that. Thanks.