Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Those who haven't yet used up their personal limit of $10K/yr/person have only this month until 10/31/22 (Monday) to lock in 9.62% for 6 months from the purchase date.
I-Bond rates change on May 1 and November 1, but a quirk is that buyers get the current rate for 6 months from the purchase and then the rate adjusts to the prevailing rate for the next 6 months, and so on.
It is expected that the new variable rate on November 1 will be 6% (projecting from 5 of 6 months of relevant CPI data available) but the fixed/base rate may go up (+0.50%? +1.00%? +1.50%?). 5-yr real rates that were negative in May 2022 are now +1.80%. https://fred.stlouisfed.org/graph/?g=Unnp
For those who want to buy 5-yr TIPS to hold to maturity should note that the next auction date is 10/20/22. There are no limits (well, cool $5 million! Edit - seems increased to $10 million!!).
As regards I-bonds, the newly introduced bill that Devesh mentions (bold added by me) could be of interest to fans....
"The Savings Security Act would require the Treasury Secretary to raise the annual cap to $30,000 per person when the average six-month annual Consumer Price Index for all Urban Consumers (CPI-U) is above 3.5%."
Bought some 5-yr TIPS at auction earlier this year, and it is losing a bit as the bond price fell. @Devesh explained the unexpected performance in his September article about TIPS and short term TIPS ETFs. Now I am rethinking how to reposition my cash.
While I agree that the constant fear-mongering in the press isn't helpful, I'm not a fan of the referenced Martin Seligman's positivity edicts, which I think create their own toxic outcomes and pressure people to just "buck up" about legitimate grievances in the business world, and life in general. This sums up the problems with his ideology pretty well: https://bostonreview.net/articles/just-wear-your-smile/
10/15/2002 is the date the Treasury announced the creation of Series I book-entry savings bonds and the $30K limit. 10/17/2002 is the date its Final Rule became effective.
It's a bit of a stretch to say that creating a new product (book entry savings bonds) with a $30K limit is "raising" the limit to $30K. Besides, the total (paper plus book entry) limit was "raised" to $60K. --- In 2008, each of those separate limits (paper and book entry) was decreased from $30K to $5K, for a total limit of $10K. --- In 2012, the limit on book entry bond purchases to $10K. But that was only to maintain (not raise) the combined limit of $10K on I bond purchases, since paper bond purchases (without tricks) were eliminated.
I didn't check beyond the history published by Treasury Direct. One can see there also that for a while the limits applied separately to paper and electronic Savings Bonds but those were unified later.
My Twitter post was a response to Jason Zweig's WSJ article that has been cited by many secondary stories on this issue. My purpose there was that the limits have fluctuated over the years and were quite high at one time. Twitter has severe word/character limits.
I used legacy TD system years ago and only last year opened the TD account online.
Just to expand on my post, I need a fixed rate of at least 1.5% so I am not in the hole if inflation goes back to 2% by end of 2023 and stays there for another 20-30 yrs. Otherwise, I will buy in January (already used 2022 limit) knowing I am likely withdrawing the money as soon as I hit the penalty free 5 yr mark or sooner. The penalty is the first three months of interest, which means I am likely giving back the highest interest. These were not a good investment starting in 2003 or so until inflation showed up in 2021. “Do not fight the Fed” means do not go overboard with IBonds.
This fantastic ride for I-Bonds started on Nov 1, 2021. There have been skeptics all along - from "too good to be true", to "this cannot last", to "they may be bad few years from now", to "it is only for $10K/$20K/$25K", etc.
Well, enjoy the ride, and if it ends, sell in a year, or two, or three...with penalty for 3-mo interest (-:)
I got on it as soon as Treasury Direct could confirm my new account (by 12/2021).
There was an article on tax loss harvesting in this month. FWIW, today was the day when I cleaned house and did a lot of TLH. It was a satisfying exercise. I urge you all to look at your portfolios closely. there must be low hanging fruit.
"Wall Street finds a tax silver lining in down market Banks are helping wealthy clients to sell investments at a loss to lighten their bills " In the MFO, on Sunday.
Comments
Those who haven't yet used up their personal limit of $10K/yr/person have only this month until 10/31/22 (Monday) to lock in 9.62% for 6 months from the purchase date.
I-Bond rates change on May 1 and November 1, but a quirk is that buyers get the current rate for 6 months from the purchase and then the rate adjusts to the prevailing rate for the next 6 months, and so on.
It is expected that the new variable rate on November 1 will be 6% (projecting from 5 of 6 months of relevant CPI data available) but the fixed/base rate may go up (+0.50%? +1.00%? +1.50%?). 5-yr real rates that were negative in May 2022 are now +1.80%.
https://fred.stlouisfed.org/graph/?g=Unnp
For those who want to buy 5-yr TIPS to hold to maturity should note that the next auction date is 10/20/22. There are no limits (well, cool $5 million! Edit - seems increased to $10 million!!).
"The Savings Security Act would require the Treasury Secretary to raise the annual cap to $30,000 per person when the average six-month annual Consumer Price Index for all Urban Consumers (CPI-U) is above 3.5%."
https://twitter.com/YBB_Finance/status/1574870529198137367
Normal annual purchase limits (without special tricks) for individuals for #IBonds has varied:
10/2002 Limit raised to $30K
01/2008 Limit reduced to $5K
01/2012 Limit raised to $10K
It is a good idea to increase limit back to $30K.
https://treasurydirect.gov/indiv/research/history/histtime/histtime_sb.htm
Bought some 5-yr TIPS at auction earlier this year, and it is losing a bit as the bond price fell. @Devesh explained the unexpected performance in his September article about TIPS and short term TIPS ETFs. Now I am rethinking how to reposition my cash.
I guess this makes me a pessimist. Yet, wait, there's this: https://medicalnewstoday.com/articles/319899#Defensive-pessimism
---
"Definitive" (paper) series I savings bonds were created in 2008 with a $30,000 limit per individual.
https://treasurydirect.gov/news/pressroom/pressroom_comibond.htm
---
In 2002, the "New Treasury Direct" online system was created. And with that came book-entry Series I bonds with a $30K limit separate from the $30K paper bond limit.
https://www.federalregister.gov/documents/2002/10/17/02-26406/regulations-governing-treasury-securities-new-treasury-direct-system
10/15/2002 is the date the Treasury announced the creation of Series I book-entry savings bonds and the $30K limit. 10/17/2002 is the date its Final Rule became effective.
It's a bit of a stretch to say that creating a new product (book entry savings bonds) with a $30K limit is "raising" the limit to $30K. Besides, the total (paper plus book entry) limit was "raised" to $60K.
---
In 2008, each of those separate limits (paper and book entry) was decreased from $30K to $5K, for a total limit of $10K.
---
In 2012, the limit on book entry bond purchases to $10K. But that was only to maintain (not raise) the combined limit of $10K on I bond purchases, since paper bond purchases (without tricks) were eliminated.
I didn't check beyond the history published by Treasury Direct. One can see there also that for a while the limits applied separately to paper and electronic Savings Bonds but those were unified later.
My Twitter post was a response to Jason Zweig's WSJ article that has been cited by many secondary stories on this issue. My purpose there was that the limits have fluctuated over the years and were quite high at one time. Twitter has severe word/character limits.
I used legacy TD system years ago and only last year opened the TD account online.
I guess it depends on one's perspective.
I consider I Bonds to just be a cash substitute.
Well, enjoy the ride, and if it ends, sell in a year, or two, or three...with penalty for 3-mo interest (-:)
I got on it as soon as Treasury Direct could confirm my new account (by 12/2021).
I am using iBond for my kid’s college education - tax free. Much better than money market of his 529 plan.
@devesh, I hear you on tax loss harvesting. Sold a bit in August and now waiting to get back in with the appropriate equivalent fund/ETFs.
"Wall Street finds a tax silver lining in down market
Banks are helping wealthy clients to sell investments at a loss to lighten their bills
"
In the MFO, on Sunday.
In The FT today.
You are welcome