New series "I" savings bond rate effective 5-1-23

[RWG1950]

The U.S. Treasury Department has announced that the new annualized I-bond rate effective 5-1-23 will be 4.30%
This includes a new fixed rate of .90 basis points. You can learn more about I-bonds at TREASURYDIRECT.GOV

It's interesting to note that for the first time in a while there are reasonable alternatives for smaller savers (for now at least) to I-bonds
in the form of U.S. Govt. money market mutual funds, Bank C.D.'s and other types of Treasury Securities (T-Bills, Notes & Bonds)

[FEDUKE404]

The I bonds are essentially a 30-year savings bond with an inflation protection of sorts. NOT for everyone. Caveat emptor.
Treasury Direct does offer a nice variety of bills (up to one year) and notes (longer term). Their web site is secure and reasonably user-friendly once you learn your way around.
Currently the 13- and 26-week bills offer the highest rates, and of course the income is exempt from state taxation.

[JON]

How does the I bond equate to the 30-year. I plan to get out in 4 to 5 from when I purchased it, and will have no or little adjustment and 12 months ago I was earning was 9%. At 4.3% I am glad I am back in 2 Year notes, I still will come out OK on the "I" getting in 21/2 years ago. Rate changes every six months on the "I".

[FEDUKE404]

How does the I bond equate to the 30-year. I plan to get out in 4 to 5 from when I purchased it, and will have no or little adjustment and 12 months ago I was earning was 9%. At 4.3% I am glad I am back in 2 Year notes, I still will come out OK on the "I" getting in 21/2 years ago. Rate changes every six months on the "I".

The I bond rate as of 05/01/2023 is 4.30%, which includes a 0.90% "inflation factor." A new rate will apply as of 10/01/2023.
After one year, you can cash in an I bond BUT if you have not held it for five years, you lose the last three months of interest earned.
The very high interest rates being paid last May are now history.
Whether an I bond purchase is a good or bad idea depends on a lot of personal factors. It should also be noted that there is an annual I bond purchase limit of $10k.
I may just leave my May 2022 purchase in place, but likely will not purchase any additional I bonds. As I noted above, Treasury Direct offers a lot of other options to consider.

[Rapid Robert]

"The I bond rate as of 05/01/2023 is 4.30%, which includes a 0.90% "inflation factor.""

I don't think that's right. The fixed component of the rate is 0.9%.

I like I-bonds more than bank CDs because you can buy them at any time, you don't have to shop the ads to find the "best" rate as with CDs, and you don't have to go through the hassle of moving money around and then sitting there for a half hour while the bank employee interacts with their computer screen doing who knows what (and of course the tellers can never help you with this, you have to wait for someone else to sit at a desk). One time I went into a local Wells Fargo branch, a bank I've been (reluctantly) doing business with for decades, and when I simply asked what the current CD rates were, they started to say I need to show photo ID and crap like that. When I protested, suddenly the clerk walked away and said I had to wait for his supervisor, just to tell me what their current rates were.

Closing out a CD is just about as bad, more than once instead of just give me a check there in the branch, I have to wait for one to be mailed to me.

If the inflation component ever falls close to or at zero (which it can), then I won't worry about losing 3 months worth of interest if I can get something significantly better elsewhere.

[FEDUKE404]

"The I bond rate as of 05/01/2023 is 4.30%, which includes a 0.90% "inflation factor.""

I don't think that's right. The fixed component of the rate is 0.9%.

I like I-bonds more than bank CDs because you can buy them at any time, you don't have to shop the ads to find the "best" rate as with CDs, and you don't have to go through the hassle of moving money around and then sitting there for a half hour while the bank employee interacts with their computer screen doing who knows what (and of course the tellers can never help you with this, you have to wait for someone else to sit at a desk). One time I went into a local Wells Fargo branch, a bank I've been (reluctantly) doing business with for decades, and when I simply asked what the current CD rates were, they started to say I need to show photo ID and crap like that. When I protested, suddenly the clerk walked away and said I had to wait for his supervisor, just to tell me what their current rates were.

Closing out a CD is just about as bad, more than once instead of just give me a check there in the branch, I have to wait for one to be mailed to me.

If the inflation component ever falls close to or at zero (which it can), then I won't worry about losing 3 months worth of interest if I can get something significantly better elsewhere.

OK, the current composite rate is 4.30%, with a "fixed rate" of <1% (see below).

I have bought via Treasury Direct numerous Treasury bills within the last year or so, and many have now matured. The debits from / deposits to my checking account are automatic and there is nothing I need to do other than to be sure sure the appropriate funds are in my account on the known debit dates.

++++++++++++++++++++++++++++++++

Here's how we got that rate:
Fixed rate 0.90%
Semiannual (1/2 year) inflation rate 1.69%
Composite rate formula: [Fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)] [0.0090 + (2 x 0.0169) + (0.0090 x 0.0169)]
Gives a composite rate of [0.0090 + 0.0338 + 0.0001521]
Adding the parts gives 0.0429521
Rounding gives 0.043
Turning the decimal number to a percentage gives a composite rate of 4.30%

[JON]

The open today the difference to the 2 year rate and the 10 year rate has really narrowed. They have said that has to happen, and it is doing it. Who every buys the 30 year rate??? Look at your local community banks 30 year rates since 2012 to 2023 are restricting there income BIG time.