Friday, January 19, 2024

IBond - Fixed Rate Now at 1.3% and I will add to my holdings


The next 5 year TIP auction is on 4/18/24. I will participate in that auction through a non-competitive bid in a Roth IRA account. As with other auctions of treasuries, the auction is set by the competitive bids. Both the accepted competitive bids and all the non-competitive bids receive the same price. 

I bonds interest rates — TreasuryDirect

As I have previously noted, when I purchase the 5 TIP at the next auction, it is not knowable with any certainty whether the 5 year TIP or the 5 year nominal treasury will end up being the better buy that day. 

The 5 year TIP will be a better buy when the average annual inflation rate over the 5 year term is higher than the breakeven inflation rate, or a worse buy when the average annual inflation rate is below the breakeven inflation rate when the bond is bought. 

Whatever the outcome, neither the TIP nor the nominal treasury may be a good investment, compared to alternatives, but only that one may simply be better than the other. 

After waiting more than 5 years, I redeemed 3 IBonds that had a .1% fixed rate. Item # 7 (9/2/23 Post) I received the original $3,000 in principal amount + $777.60 in interest, as shown in a snapshot contained in that post. I discussed buying those 3 IBonds here: Buying IBonds Through Treasury Direct | Seeking Alpha I have some more than have been owned 5 years after June 2024. I believe the fixed rate is .5% on those IBonds.  

Prior discussions of buying TIPs in the secondary market: 

Update On Buying TIPs In The Secondary Market | Seeking Alpha

The Mechanics Of Purchasing A TIP In The Secondary Market | Seeking Alpha

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