Comments on: I-Bonds are a Decent Investment again, right?

By: Giving I-Bonds Another Looksie… » Pants in a Can

Giving I-Bonds Another Looksie… » Pants in a Can — Fri, 06 Nov 2009 01:26:56 +0000

[...] last time I said that (back in April when the 6-month rate was over 5%), I threw a cool grand towards TreasuryDirect and, in hindsight, it was a move that I now feel was [...]

By: Brainy Smurf

Brainy Smurf — Mon, 20 Apr 2009 00:39:35 +0000

Thanks for the great comments guys — I’m already feeling more confident in my decision.

I’ve done a bit more research today, after the fact, and I’m thinking that I just might toss a bit more money the Treasury’s way before month’s end…

By: Michael Harr

Michael Harr — Sun, 19 Apr 2009 22:08:05 +0000

I am a HUGE fan of I bonds and have been for a long while. This is interesting territory for people like me because the fixed rate will likely be low on 5/1 and the variable rate will be zero barring something crazy. As a result, the short-term looks unpleasant for I bond purchasers.

However, I have used and recommended I bonds for emergency funds ONLY. Considering they adjust based on inflation and look good during periods of deflation, you can’t beat them for this purpose over the long-term. There are a number of benefits to I bonds over bank and brokerage offerings in the cash equivalent space:

1. Better Credit Quality – backed directly by the government and not a private corporation (FDIC/FCUA/FSLIC/SIPC)
2. Honest Returns – instead of a bank jerking around the interest rates, they are pegged to inflation plus the fixed rate when you signed up. This eliminates the possibility of falling victim to sleeping dog syndrome…you know, when the bank starts you with a great rate and once you’ve stopped reading the statements they drop the rate until you wake up…I hate that game.
3. Purpose Aligned – they are great for cash reserves since they are guaranteed by the government and keep up with inflation over the long-term making the product fit the purpose…keep it safe, keep me even with inflation

For your $350 this go around, I’d argue that you’d be better off putting it into a Roth IRA with a 3x bull ETF for the next three to five years, but if you want to pile up cash, I like I bonds even if they’re going to be a bit of a bummer over the near term.

By: Finance Junkie

Finance Junkie — Sun, 19 Apr 2009 18:57:08 +0000

I-Bonds should be very interested 5/1/09. The formula used to determine the variable inflation rate, based on CPI(U) not seasonally adjusted, is going to give us a variable rate of around -5.5%

If in fact, if there’s a floor of 0% on the net interest rate you’ll get a fixed interest rate of about 5.5% good for 30 years. If you add to the 5.5% the average variable rate of 2.8% you’ll get what I predict to be a 8.3% average interest rate over the next 30 years.

Previously, the highest fixed rate for I-bonds was in the low 3s. The tough thing that all of us have to do this May is give in and buy I-Bonds if their interest rate is 0 to 1% with the understanding that we’re getting that fabulous fixed interest rate for 30 years.