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 Post subject: I-bonds going to under 1%
PostPosted: Tue Oct 16, 2012 7:43 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
ick. CPI-U data came out this morning, and as expected, the interest rate is under 1%. I calculate the new composite rate starting Nov 1 will be 0.86%.

If you have any interest in buying I-bonds, the last week of Oct is the time to strike.

If you play your cards right, you only need to hold on to the bonds for 10 months + a couple days on each end. Doing this, gives an effective 1.57% APR (1.58% APY). If you choose to hold for an entire 12 months, that is an effective 1.32% APR (1.33% APY).

compare to a 5 yr CD at Ally (who has the lowest early redemption penalty that I have found and decent rates) that is fetching 1.68% APR. Hold that for 10 months and you get an effective 1.18% APR.

Not the good news I was hoping for, but still may not be a bad place to park $10k in safe money for 10 months or so.

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 Post subject: Re: I-bonds going to under 1%
PostPosted: Tue Oct 16, 2012 8:53 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
Please excuse, it is 1.76%. I used the wrong number in the calculation.

That brings effective APR to 1.5448% if you hold 12 months exactly, 1.841% if you hold 10 months.

Assuming you buy buy the end of the month...

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 Post subject: Re: I-bonds going to under 1%
PostPosted: Thu Oct 18, 2012 2:31 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1627
Location: Seattle, WA
Can you sell i-bonds after 10 months?


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 Post subject: Re: I-bonds going to under 1%
PostPosted: Wed Oct 24, 2012 12:23 pm 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
stannius wrote:
Can you sell i-bonds after 10 months?


If you buy at the end of Sept, the bonds record on 10/1/12. You are credited interest for the full month. As far as the gov't is concerned, you have held the bond since 10/1/12.

If you sell on 10/1/13, you are credited interest for the whole month. If you buy on the last day of the month, and sell on the first, you will have held the bond for 335 days (11 months) and satisfied the 12 month requirement. I suggest a couple business days of buffer on the buying end.

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 Post subject: Re: I-bonds going to under 1%
PostPosted: Thu Oct 25, 2012 10:29 am 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1627
Location: Seattle, WA
How hard is it to buy them nowadays? I signed up for a treasury direct account once, and logging in required 3 or 4 separate pieces of identification, including at least one that had to be received via snail mail.


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 Post subject: Re: I-bonds going to under 1%
PostPosted: Thu Oct 25, 2012 11:14 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
stannius wrote:
How hard is it to buy them nowadays? I signed up for a treasury direct account once, and logging in required 3 or 4 separate pieces of identification, including at least one that had to be received via snail mail.


I've never received the snail mail. I was able to, last April, do everything online.

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Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: I-bonds going to under 1%
PostPosted: Sat Feb 09, 2013 6:26 pm 
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Joined: Thu Jan 26, 2012 9:23 pm
Posts: 26
Location: Michigan
stannius wrote:
Can you sell i-bonds after 10 months?


I know this thread is several months old, but thought I'd post the minimum holding period. EE and I bonds can be redeemed after 12 months. In certain "hardship" situations they will allow you to redeem them before that period.

If you redeem the bonds between 1 year and 5 years, you forfeit the last three months of interest as a penalty. After 5 years, there is no penalty.

I actually like "I bonds" a lot. I automatically make "I bond" purchases at the end of each month. The bonds that I have purchased since 2/2011 are either earning 1.76% or 2.20%. Now most (or I think even all) of these rates are variable as I think the fixed rate component has been 0 throughout the duration of my purchases. However, the current rate can't be beat for a safe savings vehicle and I don't expect the inflation component of the bonds to be less than the average savings/money account rate anytime soon.

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 Post subject: Re: I-bonds going to under 1%
PostPosted: Wed Feb 13, 2013 9:20 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
bejki wrote:
stannius wrote:
Can you sell i-bonds after 10 months?


I know this thread is several months old, but thought I'd post the minimum holding period. EE and I bonds can be redeemed after 12 months. In certain "hardship" situations they will allow you to redeem them before that period.

If you redeem the bonds between 1 year and 5 years, you forfeit the last three months of interest as a penalty. After 5 years, there is no penalty.

I actually like "I bonds" a lot. I automatically make "I bond" purchases at the end of each month. The bonds that I have purchased since 2/2011 are either earning 1.76% or 2.20%. Now most (or I think even all) of these rates are variable as I think the fixed rate component has been 0 throughout the duration of my purchases. However, the current rate can't be beat for a safe savings vehicle and I don't expect the inflation component of the bonds to be less than the average savings/money account rate anytime soon.


You should also take note of when the buy is recorded. If you buy on the 30th, it is recorded on the 1st. So, if you buy on the 28th of this month and then sell on the 1st of Feb, 2014, you will have held 11 months, plus a day or two. My 10 months above, is untrue.

Also, the inflation component of the ibonds is tied to the CPI-U. It has nothing to do with what your checking/savings account is offering. Currently, if the government was to calculate the ibond rate, it would be 0% (really it's negative).

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"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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