Inflation linked savings bonds report negative inflation

[soupcxan]

Those of you holding I-bonds (like me) from the US Treasury should note that the inflation component is now -1.6%. Ridiculous...I can tell you that none of my expenses have gone down 1.6% in the last year. I guess they are juking the stats.

Quote:

The earnings rate combines a 0.00% fixed rate of return with the -1.60% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U decreased from 238.031 in September 2014 to 236.119 in March 2015, a six-month change of -0.80%.

https://www.treasurydirect.gov/news/...ondratespr.htm

[Big_Hitter]

I've noticed we've had some negative CPI the last few months

[RE2Boys]

You didn't see a reduction in gas prices from Sept 2014 My gas expenses are way down. So was the natural gas for heating the house! We had a coldest winter in 10 years and my heating bill was way down.

[shotgunner]

Quote:

Originally Posted by soupcxan Those of you holding I-bonds (like me) from the US Treasury should note that the inflation component is now -1.6%. Ridiculous...I can tell you that none of my expenses have gone down 1.6% in the last year. I guess they are juking the stats. https://www.treasurydirect.gov/news/...ondratespr.htm

I have held some I Bonds for a little more than 10 years. This has happened before a few years ago. They will not go negative but may pay 0% for 6 months. When the price of oil has skyrocketed they gave me the best 6 month return, when oil has tanked they have gone to 0%. My I Bonds have a 1% fixed rate, some lucky folks have a 3% fixed rate. If inflation is negative the fixed rate can be eaten away and they can go 0% return.

[soupcxan]

Quote:

Originally Posted by RE2Boys You didn't see a reduction in gas prices from Sept 2014 My gas expenses are way down. So was the natural gas for heating the house! We had a coldest winter in 10 years and my heating bill was way down.

Gasoline is down but it is only a few percent of my overall spending. Everything else is flat or up. Natural gas, which my heating and electric bills are based on, doesn't seem to have changed much.

[Rosie]

I bought some I-bonds in 2000-2001 and they're currently paying between 4.5% and 5.1%. I wish I bought more.

[Totoro]

Quote:

Originally Posted by soupcxan Gasoline is down but it is only a few percent of my overall spending. Everything else is flat or up. Natural gas, which my heating and electric bills are based on, doesn't seem to have changed much.

It seems to be all fuel. So your experience matches everyone else's except maybe you use a lot less fuel. That's it.

Table 1. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by expenditure category

What went down + relative weight:

• 4%: energy commodities: dropped 30%
• 0.8%: gas utility: dropped 16%
• 0.7%: airlines (fuel again): -7.5%

That's 30%*4% + 16%*0.8% + 7.5%*0.7% = -1.4% (roughly)

[Mulligan]

Quote:

Originally Posted by Rosie I bought some I-bonds in 2000-2001 and they're currently paying between 4.5% and 5.1%. I wish I bought more.

Whenever your next 6 month cycle begins Rosie you will be getting 1.4% for the then following 6 months assuming your I Bonds were the 3% fixed, due to the negative inflation adjustment. If I had them I would be hanging on also. But I only maxed out the past 5 years. I threw in the towel earlier this year and am liquidating the last on mine this month.


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[audreyh1]

Quote:

Originally Posted by soupcxan Those of you holding I-bonds (like me) from the US Treasury should note that the inflation component is now -1.6%. Ridiculous...I can tell you that none of my expenses have gone down 1.6% in the last year. I guess they are juking the stats. https://www.treasurydirect.gov/news/...ondratespr.htm

That -1.6% rate is annualized, and corresponds to -0.8% CPI drop over a 6 month period.

[Fermion]

Really starting to think the ee bonds were the better deal...

[mrfeh]

Quote:

Originally Posted by Fermion Really starting to think the ee bonds were the better deal...

Only if you keep them for 20 years.

[Ticker]

I cashed my 0% purchases in today, will transfer the money to my discover bank account.
I just can't stomach 0%....
I can always buy more later if the core interest rate picks up... damn lazy money

[soupcxan]

Quote:

Originally Posted by audreyh1 That -1.6% rate is annualized, and corresponds to -0.8% CPI drop over a 6 month period.

Yeah, it means my 2001 I-bonds will be earning a puny 1.38% for the next six months...sucks...

[Mulligan]

Quote:

Originally Posted by Ticker I cashed my 0% purchases in today, will transfer the money to my discover bank account. I just can't stomach 0%.... I can always buy more later if the core interest rate picks up... damn lazy money

I matched you today...had liquidated all IBonds until this last batch that reached 1 year anniversary this June 1. I saw they were already on the 0% rate so I withdrew them. My Treasury Direct account will be bone dry real soon.


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[bjorn2bwild]

I know this is picking up pennies, but if the I-bond is less than five years old, you will forfeit the last three months interest - better to wait three months at 0% before cashing in?

[Fermion]

I can't stomach 0% either. I am thinking about moving my small amount of I-bonds into my Chase saving account that pays 0.01%

[mrfeh]

Cashing in I bonds seems a bit short-sighted to me. The current interest rate is temporary. Once sold, you can never truly replace them, due to the annual purchase limit.

[yakers]

Quote:

Originally Posted by Fermion I can't stomach 0% either. I am thinking about moving my small amount of I-bonds into my Chase saving account that pays 0.01%

That is a small enough difference that it doesn't look significant to cash in bonds. They are a separate fixed income asset for me, I keep them as 'emergency cash' after one year, I can sell them if I need the money it is one day electronic transfer and it is state tax free, although the 0 rate means nobody pays state tax, I guess.

[Independent]

I figure that the negative is driven by oil/gas. In a few months or a few years, they will go back up. We'll see a big jump in CPI, and I-bonds will be stars.

If the CPI stays down, my non-COLA'd pension will be a more important part of my retirement income than I expected.

[FIREd]

Quote:

Originally Posted by Independent I figure that the negative is driven by oil/gas. In a few months or a few years, they will go back up. We'll see a big jump in CPI, and I-bonds will be stars.

That's my view as well. The steep drop in oil prices has been driving inflation down, but it won't go on forever. At some point, oil prices will stabilize or even bounce back and inflation will return. So I am not selling my i-bonds (I actually bought more with my tax refund this year), because once you sell them, you can't jump back in because of the low annual purchase limit. In the meantime, my CD ladder is still paying 4% so my safe money is more than keeping up with inflation, even with i-Bonds paying 0%.