Buy I Bonds Now or Wait?

[james.hendrickson]

All,

I saw the inflation headlines this morning. They were pretty brutal. The CPI is up substantially and inflation is at 40 year highs. At this point, I'm wondering if I should I buy I Bonds now, or wait until the after the May 1 reset point?

[kork13]

At this point, I would definitely wait. There's alot of expectation for further increases in the Fed interest rates, which correlate with higher fixed component rates fairly reliably. Better to wait & get an extra . 1-.2% (or more?) permanent increase in your I-bond returns.

[disneysteve]

At this point, I would definitely wait. There's alot of expectation for further increases in the Fed interest rates, which correlate with higher fixed component rates fairly reliably. Better to wait & get an extra . 1-.2% (or more?) permanent increase in your I-bond returns.

I disagree. The inflation component will increase but the fixed rate will likely remain at zero. Buy them now. I think it will be 9.62 with the next adjustment.

[LivingAlmostLarge]

fixed rate is going to stay 0%. They don't need to pay to incentivize

[MonkeyMama]

fixed rate is going to stay 0%.

Agreed. I'd personally buy now and lock in the crazy rates for the next 12 months. Who knows what will happen after that.

(Personally we did just that, we bought in March. That was before we *knew* interest rates would be 9.62% at next reset. Odds were that the interest rate would remain high though, with just 5 months of CPI data).

[scfr]

Buy I Bonds now or wait until after the May 1 reset? Both are good choices.

We (scfr household) are going to buy around May 20. At this point, waiting until after the May 1 reset and getting the new (expected to be 2.5% higher) inflation rate lock for 6 months is our choice.

I know some people play the "wait until the last day of the month" game but I don't like to cut things too close, thus setting May 20 as our approximate buy date. Especially with all the current interest in I Bonds. May 30 is a holiday. May 28&29 a weekend. Waiting until May 31 might be too late. May 26-27 might be crazy on the Treasury Direct site? Who knows.

For anyone reading this thread who wants to buy electronic I Bonds or is even just thinking about it, even if you plan to wait until after May 1, the step to take right now is open a Treasury Direct account if you don't already have one.

Recommended reading:
https://treasurydirect.gov/indiv/res...esandterms.htm

[disneysteve]

Is there any downside to buying now? Don't you get the current rate if you buy today and then it changes to the new rate when the rate adjusts? You don't lose anything by buying now, do you?

[scfr]

Is there any downside to buying now?

Potentially. I'd say probably. Per Treasury Direct (see recommended reading link):

------------------------------------------------------------------------------START TD QUOTE

Inflation rate


The inflation rate can, and usually does, change every six months.

We set the inflation rate every six months (on the first business day of May and on the first business day of November), based on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy.

However, the change is applied to your bond every six months from the bond's issue date. (The dates for these changes might not be May 1 and November 1.) When does my bond change rates?

When does my bond change rates?

January	January 1 and July 1
February	February 1 and August 1
March	March 1 and September 1
April	April 1 and October 1
May	May 1 and November 1
June	June 1 and December 1
July	July 1 and January 1
August	August 1 and February 1
September	September 1 and March 1
October	October 1 and April 1
November	November 1 and May 1
December	December 1 and June 1

END TD QUOTE----------------------------------------------------------------
First column is issue month of your bond. Second column is when new rates take effect. If you buy now you don't get the new rate until Oct 1.
I think this is why James asked. And it's why we are choosing to wait. I'm sure there's some scenario where we could come out the "losers" because of waiting. But I think waiting is the right call for us.

[disneysteve]

Potentially. I'd say probably. Per Treasury Direct (see recommended reading link):

First column is issue month of your bond. Second column is when new rates take effect. If you buy now you don't get the new rate until Oct 1.
I think this is why James asked. And it's why we are choosing to wait. I'm sure there's some scenario where we could come out the "losers" because of waiting. But I think waiting is the right call for us.

Thank you. I vaguely recalled that being the case. So if you buy in April, your rate doesn't change until October 1 but if you may in May, you get the new rate that starts then. But either way, wouldn't you still get the higher rate for 6 months - October to March rather than May to October?

[LivingAlmostLarge]

what if you buy in march?

[scfr]

Thank you. I vaguely recalled that being the case. So if you buy in April, your rate doesn't change until October 1 but if you may in May, you get the new rate that starts then. But either way, wouldn't you still get the higher rate for 6 months - October to March rather than May to October?

Yes. And buying now might be the way to go. I started reconsidering, thought about buying half now and half in May, but decided to stick with my plan because I'm trying to simplify my finances.

[QuarterMillionMan]

With the Fed's rate hike yesterday, is now a good time?

[disneysteve]

With the Fed's rate hike yesterday, is now a good time?

The rate hike has no bearing on I bonds. Those rates are already set for 6 months and change based on the inflation rate, not on the federal funds rate.

[kork13]

The rate hike has no bearing on I bonds. Those rates are already set for 6 months and change based on the inflation rate, not on the federal funds rate.

However, as the Fed rate goes up, the fixed rate typically follows to an extent. For example, when the Fed funds rate was 5.25% in 2007, I-bond fixed rates were 1.2-1.4%, then crashed to zero when the Fed rate did the same.

[QuarterMillionMan]

I have another question. I'm intending to purchase the max $10,000 but should I buy all $10,000 now or buy $5000 now and $5000 in October (thinking that I could get a higher rate)?