New I Bond fixed and blended rates announced
Rates for the next six months for I Bonds were released today. The fixed rate was raised to 1.4%, while the variable rate is 1% as expected from the CPI-U numbers announced in mid-April.
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I was hoping for a higher fixed rate but given that the low inflation component is temporary this is really no surprise. Rather than continue my monthly purchases I will likely instead invest in Treasury Bills for the next five months, then make one larger purchase of I Bonds at the end of the current six month cycle. This way I can capture a higher rate in the short-run while still capturing the 1.4% fixed rate before it expires. I look at it as a 40% higher real return than the bonds I’ve purchased since November 2005. The inflation component will be consistent across them anyway and I intend to hold for a long time. (ten years or more)
As my existing I Bond portfolio crosses the 12 month threshold where I can sell them I may do so and swap into newer bonds assuming the fixed rate component remains higher than the 1% I am earning on most of them at the moment. This will be a good opportunity to do so since I’ll only have to sacrifice three months of interest @ 2%. We’ll know for sure in six months.
Tags: Bonds, Financial News, Investing, Miscellaneous, Retirement