US Treasury Series I bonds update

[LoboGunLeather]

A year ago I posted enthusiastically about an opportunity to invest in US Treasury Series I bonds, then offering 9.62% yield. These bonds are inflation-adjusted, combining a fixed interest rate based upon date of purchase plus semi-annual adjustments based on the CPI-U. At that time the fixed rate was 0.0% plus the inflation adjustment at 9.62%, a rate that is locked in for the first 6 month period.

Since that time the rates have been adjusted twice, once in November (0.4% fixed on new bonds plus 4.4% inflation adjustment) and again in May (0.9% fixed plus 3.4% inflation adjustment). Thus our bonds earned 9.62% for 6 months, then adjusted to 4.4% for a couple of months, now adjusted to 3.4%.

A minimum holding period of one year is required. I have now redeemed those bonds, accepting a penalty of 3 months interest (at the current 3.4% rate). Redemption of the bonds, after penalties, yielded 6.49% for the one-year investment period.

I am pleased with that result. Now that local banks and credit unions are offering ~5% on short-term CD accounts I have moved those funds to take advantage.

Looks like a very short-term window of opportunity, which I'm happy to have been in position to utilize, and a resource I will keep in mind for potential future investment use.

The treasurydirect.gov website is a bit cumbersome to use, but not insufferably so. Linking to a bank account, purchase and redemption transactions are cleared in 1-2 business days.

 

[alwslate]

I recently took all of my money that I was willing to lock up for one year and moved it into 5% CDs. Seems like finding free money laying on the ground after interest rates of near zero for so long. Let's hope this situation continues for a while. The lack of income at zero interest is a crime against senior citizens on fixed incomes.

 

[Bald1]

I don't believe bank (CD Money Mkt etc) interest rates are falling anytime soon. I'd have stayed in the bonds for the last 3 months. In fact I think bank rates will be higher in 3 months….. my son sent me a link to a bank in Wichita Falls Tx that pays 6% on checking account. IIRC min balance was $40k. Fidelity brokerage CDs are pushing up on 6% as well

 

[nodpete]

Thanks for the heads up, I was adjusting my T-bills yesterday and was going to look at the I-bonds today.

 

[THE PILGRIM]

Good luck in getting your Bonds from the Treasury.
I spun my wheels for a while figuring out how to get the required Medallion Signature Guarantee.
Got it, sent the request to West Va.
About 10 days later, letter came back.
Return to Sender, Address unknown.
What? Go online, they moved to Minneapolis.
And they got a new request form. Treasury Direct apparently don't believe in mail forwarding.
Put the old form in new envelope, off it goes to Minna.
A while later get a email, processing time is in 20 weeks!
So either I'll get my bonds maybe or I'll get a response
'Use the correct form Dumb ***.'
I'm getting 5% on several things- bonds , money market, etc from Charles Schwab just by punching the buttons.
So my advice - DON'T SEND MONEY TO TREASURY DIRECT!

 

[nodpete]

I-bonds aren't paper bonds, electronic only ! I just redeemed mine and the money will be in my bank account by Tuesday at the latest.
I like using Treasury Direct, quick, easy and safe !

 

[LoboGunLeather]

Good luck in getting your Bonds from the Treasury.
I spun my wheels for a while figuring out how to get the required Medallion Signature Guarantee.
Got it, sent the request to West Va.
About 10 days later, letter came back.
Return to Sender, Address unknown.
What? Go online, they moved to Minneapolis.
And they got a new request form. Treasury Direct apparently don't believe in mail forwarding.
Put the old form in new envelope, off it goes to Minna.
A while later get a email, processing time is in 20 weeks!
So either I'll get my bonds maybe or I'll get a response
'Use the correct form Dumb ***.'
I'm getting 5% on several things- bonds , money market, etc from Charles Schwab just by punching the buttons.
So my advice - DON'T SEND MONEY TO TREASURY DIRECT!

Series I Treasury bonds are electronic instruments, not generally issued in paper format, and available only via treasurydirect.gov. US Treasury offers several other types of bonds suitable for different investors and available via banks and brokerage houses and issued in paper format.

 

[glenwolde]

The $10,000 dollar maximum is the bummer. I guess you picked up an extra $300 or so over a money market for the year.

Watch those high yield brokered CD's. The ones I see are all callable. Get one without the call and the rates drop. Personally, I think it's time to start extending one's duration and lock in some of these longer-term rates.

There's always opportunities out there somewhere....

 

[LoboGunLeather]

The $10,000 dollar maximum is the bummer. I guess you picked up an extra $300 or so over a money market for the year.

Watch those high yield brokered CD's. The ones I see are all callable. Get one without the call and the rates drop. Personally, I think it's time to start extending one's duration and lock in some of these longer-term rates.

There's always opportunities out there somewhere....

Agreed, and your estimate is pretty accurate. Wife and I purchased the maximum $10,000 per individual, per calendar year, late August 2022. At that time we had a CD account mature at 0.9% and quoting 2.75% for renewal, used those funds for the two I-bonds ($20,000) which earned 6.49% ($1298) after penalty at one year.

The earnings were not huge, but welcomed when compared to the rates on CD and money market accounts we experienced for the prior 10-plus years.

Now our mid-term savings funds are back into CD and money market accounts and growing at about 5% annually. I agree with your suggestion about locking in some of the longer term rates. In past years we usually had CDs "laddered" out several years, maturing at longer periods. Right now the best returns seem to be on the 6 to 18 month CDs, the bankers apparently unwilling to commit for the longer periods.

Ideally, we like to keep one year's budget in a money market, allowing emergency access without penalties, and additional savings in CDs maturing at one-year intervals. Of course, our investment brokers would prefer to be managing all of our money, but we don't like having all of our eggs in one basket.

 

[CalifEd]

Of course, our investment brokers would prefer to be managing all of our money, but we don't like having all of our eggs in one basket.

Or paying the management fees to the broker.

 

[DWalt]

I got a fixed 5.65% 11 month MM at my brokerage in early July. Not callable. There are some good preferreds out there with yields of 8-11%, but of course they are more risky. But there is no bond which is risk free considering inflation.