How are I-bond rates set?

[Gearhead Jim]

My understanding (duh, I've been wrong before) is that the non-inflation rate for TIPS is set by the auction process. True or false?

How is the non-inflation rate for I-bonds set? It gets changed soon, anyone want to guess whether it will go up or down?

 

[brewer12345]

They consult the stars and then set the rate. :

It appears to be based on whatever the treasury thinks they can get away with. I think I bonds are a considerably worse deal than they used to be.

 

[Gearhead Jim]

... I think I bonds are a considerably worse deal than they used to be.

What an understatement! TIPS aren't all that great, either.

In the past, both have had periods when the non-inflation rate was considerably higher. What were the conditions that caused that? And more important, when might we expect it to happen again?

 

[brewer12345]

In the past, both have had periods when the non-inflation rate was considerably higher. What were the conditions that caused that? And more important, when might we expect it to happen again?

It was what the market required. TIPS were new with no history in the US and investors evidently demanded a higher real yield to take a chance.

Dunno when we will see higher real rates.

 

[Mwsinron]

I buy my god son one every year for his birthday. I was hoping to give him some inflation protected money for college. Is there something better to buy him instead of I bonds? EE bonds don't seem to be as good as deal. We aren't talking huge sums of money but a couple thousand by the time he is 18 or so.

 

[brewer12345]

I bonds are preferable to EE bonds by a long shot.

 

[soupcxan]

I bonds are preferable to EE bonds by a long shot.

Who even buys EE bonds anymore? Currently yielding 3.60% for the next 30 years...come on!

 

[saluki9]

Who even buys EE bonds anymore? Currently yielding 3.60% for the next 30 years...come on!

For lack of a better term, old people.