4 ms·
The 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 unle
by skinnymuch 5y ago
The 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%
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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.
- skinnymuch 5y agoCool having you respond to a comment of mine! Yeah as the sibling commented. It is written in the link from the link where they bring up the formula.