I Bond, iBonds, i-Bonds or Series I bonds.

Top 88. May 3, 2005 7:41 AM

» Thruhiker - Re: Re: Re: New I Bond Rate is 4.80%

In response to Re: Re: New I Bond Rate is 4.80% posted by Kirk:

.
Historically, the real return on long term government debt is 2% which is the basis for my opinion that a 1.2% real return is inadequate.

Quite frankly, I don't understand why the government screws around with the fixed rate portion. That should NEVER change. Pick a real return and be done with it. The only thing that should change is the variable portion.

-- posted by Thruhiker

http://www.capitalone.com/savings/index....

Top 89. May 3, 2005 9:13 AM

» pbradford6 - Re: Re: Re: New I Bond Rate is 4.80%

In response to Re: Re: New I Bond Rate is 4.80% posted by Kirk:

Kirk makes an interesting case for I bonds vrs a one year CD at his local bank.

Capital One Bank has a Money Market Fund paying 3.15% and a one year CD paying 3.85%. Doesn't it make sense to shop your CDs for the best rates? Would higher CD rates dissuade you from buying I bonds to park short term money?

-- posted by pbradford6

Top 90. May 6, 2005 6:01 AM

» lcha - Re: Re: Re: Re: Re: New I Bond Rate is 4.80%

In response to Re: Re: Re: Re: New I Bond Rate is 4.80% posted by Kirk:

Kirk, if you buy your iBonds through the Treasurydirect.gov website, you can schedule the exact day the bonds will be purchased. So you can set it and forget it.

-- posted by lcha

Top 91. May 7, 2005 1:52 AM

» azxcvbnm - Re: Re: Re: Re: New I Bond Rate is 4.80%

In response to Re: Re: Re: New I Bond Rate is 4.80% posted by Thruhiker:

I Bonds and all inflation indexed bonds should yield lower than the historical 2% real rate of return on long bonds. That's because they protect you from inflation, so you should have to pay for that insurance with a lower yield. Plus I Bonds are "callable" by the purchaser, who, after 5 years, can cash them in at any time for a better yield. You should have to pay for that "callability" also. I'm surprised that the rate was increased to 1.2% after what they did to the Series E bonds (make them less attractive). It seems completely arbitrary the way they set the rate, but perhaps it was due to lack of investor interest.

-- posted by azxcvbnm

Top 92. May 12, 2005 8:18 PM

» bob90245 - Question on Treasury Direct

Here is info about redeeming I-bonds from Treasury Direct:

You can cash your Series I bonds anytime after 12 months. When you cash your I Bond, you'll receive the purchase price of the bond plus any accrued interest. If you cash a bond within the first 5 years, you'll forfeit 3 months worth of earnings.
For example:
If you redeem an I Bond after 18 months, you'll get the first 15 months of interest.
If you wait at least 5 years, you will not lose any interest.

I am considering setting up a Treasury Direct account linked to my bank. Has anyone done this? How easy is it to redeem your I-bonds into your bank account?

-- posted by bob90245

Top 93. May 12, 2005 8:34 PM

» bob90245 - Re: Question on Treasury Direct

In response to Question on Treasury Direct posted by bob90245:

I found this at www.publicdebt.treas.gov Should clarify things:

Cashing Options
You can cash your I Bond and get your original investment plus earnings. You can cash Series I bonds with issue dates of January 2003 and earlier any time after six months. Bonds with issue dates of February 2003 and after can be cashed anytime after 12 months. However, I Bonds are meant to be longer term investments, so if you cash a bond within the first five years, you'll forfeit three months' worth of earnings.

-- posted by bob90245

Top 94. May 13, 2005 6:17 AM

» lcha - Re: Question on Treasury Direct

In response to Question on Treasury Direct posted by bob90245:

I set up a TreasuryDirect account a few weeks ago and linked my Fidelity Cash MM account to it. With an account you can schedule the exact date on when you want a transaction to happen or you can buy immediately. I have not cashed in a bond yet however.

-- posted by lcha

Top 95. Jun 27, 2005 12:32 PM

» passenger - Re: Re: Question on Treasury Direct

In response to Re: Question on Treasury Direct posted by bob90245:

Any body knows If I I redeem some part of I bond holding on TreasuryDirect, can I specify which I bond I redeem?

Since which purchase of the I-bond I redeem will decide how much interests I earned, it decides how much tax I need to pay. You also want to first redeem those lower fixed rate ones.

Will any statement from TreasuryDirect help you to do it or you have to keep the booking yourself and figure out how much portions from the interests are from those you sold and pay the tax?

Thanks.

-- posted by passenger

Top 96. Oct 26, 2005 5:05 PM

» Normxxx - Buy now or later?

Sandra Block: Your Money— Savings Bonds: Should you buy now or later?

By Sandra Block, USA TODAY | 26 October 2005

The consumer price index rose 1.2% in September, the largest monthly increase in 25 years. Economists hastened to point out that the "core" rate, which excludes food and energy prices, rose only 0.1%. That's comforting if you bike to work and grow your own food. Otherwise, you're probably worried about inflation.

For savers, though, there's an upside to inflation. On Nov. 1, the rate on inflation-adjusted Savings Bonds could rise as high as 6.9%.

But because of the way I Bonds are constructed, investors may be better off buying before the new rate is announced, says Daniel Pederson, author of Savings Bonds: When To Hold, When To Fold and Everything In-Between.

The rate on I Bonds consists of two parts: an inflation component that's adjusted every six months and a fixed rate that stays the same for the life of the bond. On May 1, Treasury raised the fixed rate to 1.2% from 1%. Come Nov. 1, Treasury could raise it again, lower it or leave it alone.

Pederson believes Treasury may lower the fixed rate to as low as 0.5%. Because of the high inflation rate, Treasury can cut the fixed rate significantly "and still have a really attractive composite rate," he says.

For that reason, Pederson recommends buying I Bonds before Nov. 1. If you take his advice, you'll earn the current rate of 4.8% for the next six months. After that, your I Bond will adjust to about 6.9%, and you'll earn that rate for the next six months.

Over the long term, a cut in the fixed rate would make your I Bonds less attractive. If Treasury cuts the fixed rate to 0.5%, the combined rate for I Bonds purchased after Nov. 1 will be about 6.2%— not a bad return. But over the life of your I Bond, you'll earn only half a percentage point over the inflation rate, vs. a 1.2% inflation premium on an I Bond purchased before Nov. 1, Pederson says.

If you want to lock in the current fixed rate, make sure your I Bonds have an October issue date. Don't wait until the last minute. Investors who buy their Savings Bonds electronically through Treasury Direct need to provide at least 24 hours for the money to be withdrawn from their accounts, says Stephen Meyerhardt, spokesman for Treasury's Bureau of Public Debt. He recommends placing orders no later than Friday to ensure an October issue date.

Investors who buy their Savings Bonds through a bank branch can get an October issue date on I Bonds purchased as late as Oct. 31, Meyerhardt says.

But that's risky: If you buy after normal business hours, you may end up with a November issue date. To be safe, buy your I Bonds no later than Thursday, Pederson says.

No need to rush?

Tom Adams, author of Savings Bond Alert, has a different fixed-rate forecast. He says there's a good chance Treasury will raise the fixed rate for I Bonds. If he's right, the combined rate for I Bonds will top 7%, and investors who buy after Oct. 31 will get a better deal.

Adams believes the fixed rate for I Bonds is linked to the equivalent market rate for Treasury Inflation-Protected Securities, or TIPS. TIPS are inflation-adjusted bonds issued by the U.S. Treasury, and the market rate on those securities is higher than it was six months ago, Adams says. His prediction: Treasury will raise the fixed rate on I Bonds to 1.3% to 1.5%.

Treasury officials won't reveal how the fixed rate is determined. The rate is "discretionary on the part of the Treasury," Meyerhardt says.

Playing the odds

Whether you buy I Bonds before Nov. 1 or after, you'll get a rate that beats other conservative investments, such as certificates of deposit and money market funds.

When you buy Savings Bonds, you're required to hold them for a minimum of 12 months, so don't buy one if you think you'll need the money before then. If you cash them in before you've held them five years, you'll forfeit three months of interest.

But at current rates, investors who sell I Bonds after a year and take the penalty will still earn more than they can get on most other low-risk investments, Pederson says.

Treasury will also announce a new rate for EE Bonds on Nov. 1, but a recent change in the way the rate for those bonds is calculated has made them less attractive, analysts say.

Earlier this year, Treasury switched EE Savings Bonds to a fixed-rate formula. The rate is adjusted every six months, but the rate in effect when you buy EE bonds will remain the same for as long as you own them.

EE Bonds issued from May 1 through Oct. 31 pay a 3.5% rate, and Pederson predicts the rate will stay the same on Nov. 1.

For more information, go to http://www.treasurydirect.gov.

______________

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx