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US Series I Savings Bonds Now Yielding 7.12%
- CJefferson 5y agoDoes anyone want to explain why this is an interesting story?
- johng 5y agoIt’s about as safe an investment you can make and it’s a super high yield.
- heavenlyblue 5y agoIs it available to non-US citizens?
- gpapilion 5y agoNo, but you have to be a resident or work for the US oversees if not a citizen.
- rajup 5y agoBut the rate is only for 6 months and limited to $10000 per SSN per year, which does not make it terribly useful.
- stronglikedan 5y agoseems very useful for a $10k investment, if it's going to make a considerable amount for that $10k.
- driverdan 5y agoIt's breaking even based on the current rate of inflation. It doesn't yield any positive returns.
- watchdogtimer 5y agoFWIW, you can get purchase[0] up to an additional $5000 a year in paper format if you overpay your Federal income taxes and request the refund be paid as a paper I-bond. [0] - https://www.treasurydirect.gov/indiv/research/faq/faq_irstaxfeature.htm https://www.treasurydirect.gov/indiv/research/faq/faq_irstax...
- mhb 5y agoIt also seems like you can pay an extra $5K in estimated tax in December, use the refund of it to buy a series I bond and then convert that to an electronic bond.
- wittjeff 5y agoThe $10K limit is for I-bonds. If you want more inflation protection from the treasury, you can buy TIPS up to $5M.
- hpoe 5y agoProof that the inflation we are experiencing is structural not transient.
- ethbr0 5y agoIt proves nothing of the sort. The method they use to calculate the current rate is simple and immediate. Furthermore, because these are the direct rates (e.g. for new bonds purchased from US government offerings), they're whatever the US government decides (in this case, CPI calculated). What you're probably confusing is post-issue market bond rates, which would be indicative of the market's opinion of future inflation. > 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.
- gpapilion 5y agoI’m not sure of that the rate is adjusted twice a year. Inflation was high in the previous 6 months so the rate is higher. We will know in another 6 months.
- wittjeff 5y agohttps://www.nytimes.com/interactive/2021/08/18/opinion/inflation-economy-transitory.html https://www.nytimes.com/interactive/2021/08/18/opinion/infla...
- SavantIdiot 5y ago7% on a bond is very good. 7.2% doubles every 10 years. For those of us getting older with lots of stock assets, we (conservative investors) want to transition to something safe so that smash-and-grab market fluctuation don't make us lose our money in retirement. Tiered bonds are something safe to do when you hit your mid 50's once the "thrill" of investing in what are today called "meme" stocks ("penny stocks" in the 80's/90's) has passed. EDIT: S1 bonds apparently aren't fixed forever. Thanks Purple_ferret points out that part of the rate changes, as it is based on a fixed rate and the inflation rate. This is why I have an RIA to filter all my decisions. From the web: "Inflation rate Unlike the fixed rate which does not change for the life of the bond, 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? "
- purple_ferret 5y agoThese look like a variable rate though that adjusts every 6 months.
- SavantIdiot 5y agoYes, thanks, just updated my post.
- waynecochran 5y agoUsing A = P(1 + rt) and setting A = 2P and t = 10 gives r = 1/10 or 10% -- where is my math wrong?
- SavantIdiot 5y agoIt's exponential growth. (1.072)*(1.072)*(1.072)*(1.072)*(1.072)*(1.072)*(1.072)*(1.072)*(1.072)*(1.072) = ~2.00
- refurb 5y agoTypical inflation protected bonds pay maybe half this? Because, well, inflation was low. Now that inflation is higher, returns are higher.
- deleted 5y ago[deleted]
- ForHackernews 5y agoInflation hawks are very excited that their stopped clock is finally on time.
- PeterisP 5y agoFor quite a long time now money has been cheap and there has been a lack of investments with good returns; i.e. you could get very safe investments at 1% return or less. 7% is a relatively huge yield for safe bonds (the standard US treasury 12month security rate seems to be 0.12% now, much lower), so it seems a bit surprising.
- NationalPark 5y agoPeople aren't reading the link and don't realize that it's 1. an I bond not a T bill and 2. Has a variable interest rate based on measured inflation that adjusts twice a year (the 7.12% in the title is the combined rate, so it can change during the term of the security).
- loeg 5y agoIn particular the fixed rate component is 0%. It will match inflation but not beat it.
- medvezhenok 5y agoIt can beat inflation but only in a very certain/rare circumstance - inflation followed by deflation (since the nominal return on the bond can never drop below 0%).
- tombert 5y agoI'm kind of an idiot with anything terribly elaborate in the financial world, so forgive a bit of a dumb question: what are the downsides to bonds instead of using something like a CD?
- johng 5y agoThe bond usually has a much lower yield because it is safer.
- bluedevil2k 5y agoWhat? This isn’t correct, bonds have higher yields than CDs.
- deleted 5y ago[deleted]
- skizm 5y agoNo access to your money for a fixed period of time and usually (much) lower returns than if you just invested in a broad market mutual fund / ETF.
- benmanns 5y agoI bonds in particular cannot be cashed out before 12 months, and before 5 years there is a penalty. Bonds are not covered by FDIC insurance and can default (though less relevant for US Treasury bonds which can print USD and more relevant for corporate/foreign bonds).
- foobarian 5y agoIs their site right that the maximum yearly purchase is $5k/$10k paper/electronic? That's... not very much.
- mhb 5y agoYes.
- prasadjoglekar 5y agoIt's not, but you can buy that per person per year. So family of 4 can invest up to $40K annually.
- edge17 5y agoYou can buy as much or as little as you want from your normal broker (schwab, ibkr, fidelity, etc)
- loeg 5y agoI bonds are only sold on Treasury.gov. You might be thinking of TIPS, which are a different instrument.
- golergka 5y agoInflation is scaring me even more now.
- reportingsjr 5y agoYou should look at a historical chart of inflation for USD covering the last ~100 years.
- latchkey 5y agoI have an Ally bank account. Over the past couple years, they've been great about religiously informing me of my interest rates dropping to almost zero. I see something like this and just have to laugh. When will I get my increase notification?
- jjoonathan 5y agoWhen you go to pull your money out and move it to somewhere offering a better deal.
- latchkey 5y agoOh, to be clear, the account is empty. I pulled out long ago. Traditional finance is dead to me. But your comment is great. You're spot on.
- ceejayoz 5y agoMost savings accounts follow the Federal funds rate (https://en.wikipedia.org/wiki/Federal_funds_rate https://en.wikipedia.org/wiki/Federal_funds_rate) pretty closely. When it's near zero, so will your savings account be. Chances are your credit card APRs dropped a couple percent over the same time, too (https://en.wikipedia.org/wiki/Prime_rate https://en.wikipedia.org/wiki/Prime_rate).
- latchkey 5y agoYes, of course, this money isn't the same as that money. I just find the irony hilarious. Credit card APRs are meaningless to me. I learned the hard way to never hold a balance on them. Yet another financial racket doomed to keep people poor. Those rates are absurd.
- jacquesm 5y agoLucky you, mine are < 0. (-.5 % to be precise). That doesn't stop the government here from calculating your taxes based on an imaginary 4.5% gain.
- mensetmanusman 5y agoThis yield means we are expecting much higher inflation than normal. The 2% target was missed.
- driverdan 5y agoIt doesn't predict the future, it's based on the current rate of inflation. We're already experiencing it.
- ppierald 5y agoI Bonds are inflation protected bonds, so the context here is that the high yield on these bonds reinforces the reality that inflation (whether temporary or long-term) is here.
- JumpCrisscross 5y ago> the high yield on these bonds reinforces the reality that inflation (whether temporary or long-term) is here Savings Bonds aren't traded. Their yield is calculated by the Treasury from the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy. As such, it offers no more information into the future course of inflation than the CPI-U itself. The data you're looking for are the 10-year breakeven inflation rates [1], which ares calculated from the premium the market places on the Treasury's tradable inflation-protecting bonds [2] and its tradable standard bonds. [1] https://fred.stlouisfed.org/series/T10YIE https://fred.stlouisfed.org/series/T10YIE [2] https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm https://www.treasurydirect.gov/indiv/products/prod_tips_glan...
- Naga 5y agoFor those of us who were confused (like me), this is not a treasury bond, but a real return bond. It pays interest based on a posted rate, plus additional interest to cover inflation for a period. The inflation rate will change twice a year based on inflation.
- pjc50 5y agoIt is a treasury bond, in that it's issued by the US treasury and therefore has the risk-free property. It just pays more than the open market rate for t-bills because it's a special product to subsidise individual savers.
- ethbr0 5y agoSee here: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds...
- pjc50 5y agoNot responding; has HN DDOSed the US treasury? Explainer from a different page: https://www.investopedia.com/best-savings-bonds-5196440 https://www.investopedia.com/best-savings-bonds-5196440 which had the rate of 3.54% as of August. Presumably it's shot up due to inflation estimates. In which case you should probably buy some immediately if you have spare cash and want a risk-free return and meet the other criteria. I used to have the UK equivalent until the particular product was phased out, but it appears that a newer version is available.
- anm89 5y ago7% is likely a negative real rate at the moment.
- joelbluminator 5y agoMight do better than the market in 5-10 years though...
- anm89 5y agoI don't disagree but it's still worth noting
- sethammons 5y agoback when I worked as an investment advisor, I met a lady who had a 30 year $250k CD with a fixed 15% (maybe higher). That was a solid investment!
- anm89 5y agoYeah that is one of the cases where the older generation really did have it way easier. Imagine having access to 15% CDs. I know 20% was out there too.
- mdorazio 5y agoThe flip side is that they were buying these things when other interest rates were also correspondingly high due to inflation, so they got hosed in other ways (think mortgages).
- newacct583 5y agoCite for that? No one with any expertise has predicted a >7% inflation level that I'm aware of. This sounds like something you got from talk radio. (Edit: two replies have taken this out of context. Savings bonds have a minimum term of five years (well, without penalty). For them to have a negative yield, we need to see aggregate inflation >7.12% over the next five years. That's nuts, sorry. No one is predicting that.)
- deleted 5y ago[deleted]
- nwvg_7257 5y agoThis doesn't mean what people think it means. They adjust the inflation rate every 6 months https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm https://www.treasurydirect.gov/indiv/research/indepth/ibonds... . Right now it yields 7.12% because the last inflation number was really high, but once inflation goes back to normal, the yield will be much lower.
- mc32 5y agoRight. The real question is : when will it abate? Is it transitory as they unflinchingly claimed or are we in the Carter Years?
- pjc50 5y agoWhen the real shock of COVID disruption abates. Which is .. not looking great at the moment.
- mc32 5y agoEven Bill Maher is saying we're pretty much at a plateau and should act like it instead of stretching this further for whatever reasons.
- ksaun 5y agoWhy do you say "even" here? Bill Maher has expressed frustration with lockdowns throughout the pandemic. That he holds the view you mention does not seem surprising or remarkable to me. (He also seems like an unusual choice to bring in as an authority on this topic. He is primarily a comedian.)
- op00to 5y agoEven Donald Trump said end the lockdowns!!!
- angelzen 5y ago
- bduerst 5y agoInflation rate is just over 5% so that makes the composite rate -4% (or 0).
- anm89 5y agoCPI is 5% not inflation. If you believe the average American's monthly expenses are only up 5% this year I've got some bridges to sell you
- deleted 5y ago[deleted]
- bduerst 5y agoWhat do you think the inflation rate is then? It's only been over 5% since July, not YTD: https://ycharts.com/indicators/us_inflation_rate https://ycharts.com/indicators/us_inflation_rate
- anm89 5y agoThere is no "one true inflation" but there are certainly better ways to look at it than CPI. For one get rid of all the hedonic adjustment nonsense, stop moving the goal posts by changing basket composition, and focus on small group of food, housing, and transportation. If you do that you are going to get a hell of a lot higher than 5%
- Spooky23 5y agoThere’s no one answer or methodology that answers all needs. CPI isn’t perfect but does capture a consistent and balanced view of inflation. I know for my family, the only significant inflation factor is food. I have a short commute and fixed mortgage. For my family members who live in the exurbs, fuel costs are very impactful. Rural inflation isn’t captured well because rural areas have been depopulating.
- skinnymuch 5y agoThe fixed rate is 0% as has been the case. The inflation yield rate has been bouncy. This doesn’t seem as good as the title and comments are making it seem unless things stay this way. Table near bottom of page shows the inflation rate over time. Edit: I agree this could be a sign of something long term Edit: recent history of rates -- Inflation rates -- Nov 2021 3.56% May 2021 1.77% Nov 2020 0.84% May 2020 0.53% Nov 2019 1.01% May 2019 0.70% Nov 2018 1.16% May 2018 1.11% Nov 2017 1.24% May 2017 0.98% Nov 2016 1.38% May 2016 0.08% Nov 2015 0.77% May 2015 -0.80% -- Fixed Rates above 0 or .1% -- Nov 2019 0.20% May 2019 0.50% Nov 2018 0.50% May 2018 0.30% The overall rate can't go below 0% The formula is: fixed rate + (2 * inflation rate) + (fixed rate * inflation rate) So for these 6 months: 0 + (2 * 0.0356) + (0 * 0.0356)] = 0.0712
- LurkingPenguin 5y ago> This doesn’t seem as good as the title and comments are making it seem unless things stay this way. Table near bottom of page shows the inflation rate over time. I wouldn't purchase these bonds for a number of reasons, but I do think it's worth noting that the case for today's inflation being something more than "transitory" is stronger than the case for today's inflation being "transitory". Trying to navigate the environment today while looking in the rearview mirror is a good way to crash your portfolio.
- beervirus 5y agoI certainly wouldn’t put all my money into these bonds. But as an inflation hedge, it seems fine to toss in $10k per year (which is the maximum a person can easily buy anyway).
- jacquesm 5y agoThere is nothing in that formula that stops it from going below zero. You are making assumptions about the inputs.
- staticcaucasian 5y agoNo need to assume it's written there clearly: 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 take away more than the fixed rate, we don't let that happen. We stop at zero.
- tacobelllover99 5y agoInflation
- martythemaniak 5y agoI think a lot of people who have never seen inflation think that 10% is "hyperinflation". Please look deeper into 20s Germany, 90s Eastern Europe, 2010s Venezuela, etc. Inflation doesn't just go from 1% to 1000% in a year, it has its own growth rate and takes years to develop. If you're worried about inflation, you should be looking at yearly growth, like 5% this year, 10% 2022, 20% in 2023, etc. This became a problem in those places because for various reasons, those societies were utterly dysfunctional and could not react and contain it.
- 999900000999 5y agoAny real risk in dumping 10k in these and forgetting about it for a decade. Have these ever lost money ? 7% yield is outrageously good assuming you can't lose money. Then again US currency might be worthless if they default on these.
- arthurcolle 5y agoThe bonds can go down in value lol EDIT: Never mind, these are savings bonds and can't be traded
- staticcaucasian 5y agoBecause the fixed rate is based on treasurys and the inflation rate is based on inflation, they're essentially locked-in at zero truly real return. Which is not a bad 'floor' position for your portfolio!
- sacred_numbers 5y agoThe only risk is losing out on greater gains from investing in a higher yield asset. Keep in mind that the yield on these will probably drop in 6 months, since the dividend is adjusted semiannually. If inflation keeps going the dividend will stay high, but other assets will also appreciate due to inflation.
- 999900000999 5y agoCurrently I'm maxing out my 401k, this seems like a good plan once I hit the 20k annual max.
- mhb 5y agoNo risk other than situations in which there will be much bigger problems. They can't lose money.
- loeg 5y agoThe 7% is adjusted every six months to match inflation. The real inflation-adjusted yield on these is 0.0%. It’s better than cash, but has some short term redemption restrictions.
- nabla9 5y agoThese are non-marketable composite-rate bonds. Safe inflation protected investment. Yield can't go below 0% even with deflation. If you want to see what market thinks, follow: Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Inflation-Indexed https://fred.stlouisfed.org/series/DFII10 https://fred.stlouisfed.org/series/DFII10 Currently at -1%
- squidproquo 5y agoThis is not a great investment. It's pays it's base rate (0.0%) plus inflation (7.12%). The rate is based on inflation and is reset every 6 months, and I'm assuming the base rate of (0.0%) doesn't change. It may make sense for some people who are risk-averse and already have savings in a bank account that is getting demolished by low rates and high inflation.
- loeg 5y agoRight, the base rate never changes for the life of the bond, and it generally outperforms cash while also being zero-risk.
- InTheArena 5y agoSounds like a great time for the largest spending bill in history.
- seniorThrowaway 5y agoI bought one in the early 2000's, should be getting about 10% on it. The trouble with these is that the fixed rate has been 0% for some time now. If inflation does go down you could end up with a very low yielding bond. I forget what exactly it equates to on a yearly interest basis but series E bonds don't really pay squat until they hit the 20 year mark, at which time they are guaranteed to double. I wish when I was younger I had put the max into those each year I was able to, that's a nice little "pension" when you are older.
- loeg 5y agoE bonds are guaranteed to double in value at 20 years, for a nominal (not inflation adjusted) ~3.5% return. They yield almost nothing before the 20 year term.
- seniorThrowaway 5y agoThanks. They were a decent deal back in the low CPI days.
- anthony_r 5y agoFYI, normal TIPS have the fixed rate well below zero (which makes the total yield add up to close to where the fixed rates bonds trade at, around 1-2%). These retail instruments are kind of no brainers if their fixed rate is artificially not allowed to drop below zero.
- itake 5y agoWith todays market, or even yesterdays, taking 20 years to double in value seems low IMHO. At 5% interest, it takes 14 years to double. At 10%, 7.2 years.
- mikeiz404 5y agoFor reference: - I-Bonds base inflation off the CPI-U index - CPI-U for 2020-2021 is around 5.4% and this table breaks down the different areas it measures: https://www.bls.gov/news.release/cpi.t01.htm https://www.bls.gov/news.release/cpi.t01.htm - And some info on the CPI-U: https://www.investopedia.com/terms/c/cpiu.asp https://www.investopedia.com/terms/c/cpiu.asp From looking at the 2020 - 2021 breakdown, and if I am interpreting this correctly, the biggest single category change is in energy at almost 25% with a contribution of ~1.81% to the index.
- miketery 5y agoSo I registered for an account just now. Most interesting part was when I had to login. You have to use a Web UI keyboard (i.e. buttons arranged in a keyboard), to key in the password. I use a pw manager, so that would be annoying. Ended up doing inspect element, and deleting the readonly attribute. That worked. Super weird.
- kashunstva 5y agoSadly Treasury Direct excludes U.S. citizens living abroad. If you do not have an address of record in the U.S. you may not create a Treasury Direct account. Interestingly though they have no such condition on taxation of my income in my current of permanent residence!
- webinvest 5y ago7.12% for Treasury bonds is great but you can get 17-21% with USDC stable coins (crypto). On Kucoin you can make money by lending out stablecoins to margin traders. Here are some of the current rates: Lend USDC for 7+ days: 17.52% Lend USDC for 14+ days: 20.44% Lend USDC for 28+ days: 20.80% Margin lending is safer than most other forms of lending because margin loans are fully collateralized and if the borrower gets a margin call, their assets are auto-liquidated to pay you back. In the rare event that the system couldn’t get back all of the collateral, the difference is paid out from an insurance fund that about 10% of interest is paid into. Benefits: 1) interest is paid out daily and can be (automatically) reinvested. 2) your investment can be pulled out in 7-28 days or less if the borrower pays you back earlier. 3) there is no interest forfeit penalty that these bonds have. Drawbacks: I don’t think there is any 7% yielding asset in the world that is as safe as a US government bond. Disclosure: I don’t do this myself, hold many bonds, or keep much cash. This is a financial suggestion but it is not a financial recommendation. Do your own research.
- webinvest 5y agoWhat’s with the downvotes? If you have a contradictory opinion, post it!
- ac29 5y agoYou're coming into a thread about ultra-safe treasury bonds to shill a risky, possibly illegal (in the US) crypto lending product. It doesn't add anything to the conversation - of course you can theoretically make more than 7% by taking on more risk.
- webinvest 5y agoFair point. Maybe this comment should be deleted then.