Treasury Bills, Notes, and Bonds Discussion 2024+

[big-papa]

Nothing certainly wrong with waiting until the end to get best calculation. In this case its a total no brainer to buy this cycle over next cycle in terms of maximizing the fixed component. With less than 2 months left there is no real way the fixed can reverse trajectory to beat the present 1.1%.
The Series EE Bond owners have just been abused the past several years. That present formula if any is just horrible. Back in the day, for several years it was 90% of the 5 year treasury. It is not within earshot of that today.
For me that is why I like a variety of income sources as accurately predicting interest rates is a hazardous occupation.
When some of my CDs mature I could find them to be paying under the current total IBond yield. That would not have been the case 6 months ago. That is also why I have long end income issues also. That can change week to week also and having recently purchased some is working well now.

One week the expert media hypes 10 year heading to 5%, a couple weeks later the discussion flips to if it breaks 4%. I try to ignore the noise and focus more on allocation size.

Yup, everybody has their own goals. For us, back when we were buying I-bonds, it was more about each of us having bonds mature each year over a 10 year period. That goal was met with our last mutual gifts back in late October of last year, which is late enough in the year that when they mature we'll count it in the next year, if either of is still around or even cares at that point.

It may indeed be a no-brainer to some, and since we're done with our purchases it's moot anyway, but if I can get closer to near-certain knowledge by waiting a couple of months, I'll do that as my prognostication capabilities have time and time again shown to be flawed and the world has a way of not bending to my will anyway. YMMV.

Cheers

 

[FlyingCircus]

Wouldn't surprise me if dropped further from my predicted 1.0% to 0.9% since I last did my calculation.

We did our last gift box purchase just before last November's reset and got the 1.3% ones. We're done now as we now have I-bonds maturing every year for 10 years, starting with the year we turn 85, though the last one matures in November before the year we turn 95. I'm sure we won't care so much by then, if we're still around.

@big-papa & @Mulligan, that is similar to an approach proposed by a former investment manager I follow elsewhere. Interested in your (or anyone interested's) thoughts. The approach is: instead of a SWR based withdrawal strategy (4%, 4.5%, guardrail-based, etc etc) to avoid running out of money, and instead of long term annuities, set a life expectancy target age (80? 85?), put 10-20% of the portfolio into TIPs dated out around that time all at once to guarantee NOT running out of money, and spend the rest of the portfolio basically linearly down to zero (or zero + a legacy target you want to ensure) to that age.
If the money is needed before that age due to catastrophe, just sell the TIPs at the point. If not, when the TIPs mature, roll them into an immediate annuity at that point, which will pay out very well because of the limited life expectancy remaining.
$100K in a 10-year at 1.8% plus current inflation assumed 2.8% remains would end up $157000 in 10 years, roll it again for another 10. The 30 is at 2.8% + inflation but I'm not thinking 91.

 

[Mulligan]

@big-papa & @Mulligan, that is similar to an approach proposed by a former investment manager I follow elsewhere. Interested in your (or anyone interested's) thoughts. The approach is: instead of a SWR based withdrawal strategy (4%, 4.5%, guardrail-based, etc etc) to avoid running out of money, and instead of long term annuities, set a life expectancy target age (80? 85?), put 10-20% of the portfolio into TIPs dated out around that time all at once to guarantee NOT running out of money, and spend the rest of the portfolio basically linearly down to zero (or zero + a legacy target you want to ensure) to that age.
If the money is needed before that age due to catastrophe, just sell the TIPs at the point. If not, when the TIPs mature, roll them into an immediate annuity at that point, which will pay out very well because of the limited life expectancy remaining.
$100K in a 10-year at 1.8% plus current inflation assumed 2.8% remains would end up $157000 in 10 years, roll it again for another 10. The 30 is at 2.8% + inflation but I'm not thinking 91.

FC, I am a poor candidate to enrich your knowledge since I dont typically spend most of my monthly pension check, so I dont have or need a WR strategy.
My only modest thought would be to think through strategy of using a long dated TIPS issuance as a means to cash in for a “catastrophe”. Long duration TIPS can get pummeled like a long duration fixed treasury. Look back at LD TIPS pricing in past years.
That is where the IBONDS have the advantage but you would really have to jump some big other worldly hoops to get enough in them to accomplish in any short order.
But as a comparison to 5yr TIPS, Tips Watch writer David Enna shows IBONDS at present snapshot in time are better than 5 yr TIPS.
CUSIP 91282CNB3 had its originating auction on April 17, 2025, generating a real yield to maturity of 1.702%. So its real yield has fallen a remarkable 60 basis points, at a time when the Federal Reserve has done nothing. The yield is falling in anticipation of possible substantial future cuts.
….

• Interest earned on the I Bond is tax-deferred. Not true for the TIPS unless it is held in a tax-deferred account. In a traditional IRA, the TIPS loses its state income tax exemption. That won’t happen with an I Bond.
• The redemption date is flexible — after 1 year with a 3-month interest penalty, or 5 years with no penalty, or any time period the investor chooses up to 30 years. The TIPS has a defined maturity date — in this case April 15, 2030.
• The I Bond continues to compound interest payments until it is redeemed or matures. A TIPS pays out its coupon rate twice a year, and so that amount does not compound.
• The I Bond cannot ever lose a penny of value, while the TIPS will lose accrued principal at times of deflation.

Conclusion: When an I Bond has a fixed rate of 1.10%, it is a superior investment to a 5-year TIPS with a real yield of 1.10%.

Treasury Inflation-Protected Securities

TIPS: Perfect investment for imperfect times? News, ideas, alerts

tipswatch.com

 

[big-papa]

@big-papa & @Mulligan, that is similar to an approach proposed by a former investment manager I follow elsewhere. Interested in your (or anyone interested's) thoughts. The approach is: instead of a SWR based withdrawal strategy (4%, 4.5%, guardrail-based, etc etc) to avoid running out of money, and instead of long term annuities, set a life expectancy target age (80? 85?), put 10-20% of the portfolio into TIPs dated out around that time all at once to guarantee NOT running out of money, and spend the rest of the portfolio basically linearly down to zero (or zero + a legacy target you want to ensure) to that age.
If the money is needed before that age due to catastrophe, just sell the TIPs at the point. If not, when the TIPs mature, roll them into an immediate annuity at that point, which will pay out very well because of the limited life expectancy remaining.
$100K in a 10-year at 1.8% plus current inflation assumed 2.8% remains would end up $157000 in 10 years, roll it again for another 10. The 30 is at 2.8% + inflation but I'm not thinking 91.

Most of the withdrawal methods you're quoting don't guarantee that you won't run out of money. In one form or another, they're assuming that the future has a lot of similarity to the past. Any success rate that might come out of those can only be considered as success had you retired in the past. Some might do better than others in the future, but future chances of success are unknowable.

I spent probably a decade studying just about every withdrawal method there is. One thing I knew is that I didn't want to choose a method where success was defined as avoiding the catastrophe of running out of money.

I ultimately landed on a belts-and-suspenders method: Fixed, inflation indexed income floor comprised of SS + a 30 year TIPS ladder and using amortization to calculate withdrawals from a risk portfolio which, for us is 100% stock though it could be any AA that makes one comfortable. The tradeoff here is that the portfolio will not go to $0 before the planned date, but the withdrawals from the risk portfolio will not be steady from year to year - hence the income floor. I'd much prefer scrambling during a bad year with a low withdrawal vs. depleting my portfolio altogether.

It's often said, and it's probably true, that the clarity of what your needs are will be much fuzzier the farther out in time you attempt to plan. So I understand the idea for going with more certainty up to, say, one's life expectancy and having a backup plan for that point onwards.

Because of some fortunate tailwinds in the last couple of years before retirement, it turned out that we could fully fund our nondiscretionary spending with SS + our TIPS ladders + stock dividends till our mid 90's. Now we treat our risk portfolio and our I-bonds as something we can use for lumpy, discretionary, and backup plans should anything untoward happen with SS or TIPS and that might also include increased nondiscretionary spending later in retirement or if it appears that at least one of us has some longevity beyond what we planned for. We still do the amortization withdrawal calculations on our stock each year, but that's only to set a budget for any extra we might want to spend. So far, we're not coming anywhere close to what we actually could spend.

Examples of amortization methods include
VPW: https://www.bogleheads.org/wiki/Variable_percentage_withdrawal
TPAWPlanner: https://tpawplanner.com/
A 2 part blog series by user bogleheads user Siamond which is probably the closest thing to what we do.
https://www.bogleheads.org/blog/2019/02 ... -of-money/
https://www.bogleheads.org/blog/2019/02 ... ey-part-2/

Bottom line: I think it's probably best to live below ones means, remain flexible, and have a plan B. We have a preference for doing so systematically.

Cheers.

 

[Mulligan]

Latest IBond inflation projection with one month left in the cycle from TipsWatch. Then add 1.1% if bought before Nov. 1. Or add to ones own fixed rate they already have.
For I Bonds. The August report is the fifth of a six-month string that will determine the I Bond’s new inflation-adjusted variable rate, which will be reset November 1 and eventually roll into effect for all I Bonds. Inflation from April to August has increased 1.31%, which would translate to a variable rate of 2.62%. One month of data remains and we are probably looking at a new variable rate of 3.0% to 3.2%, higher than the current 2.86%.

 

[tulak]

I bought 5-year TIPS today at auction to fill in my ladder for 2031.

1.182% yield, 1.125% coupon rate. Break-even with 5-year treasuries is 2.41% inflation rate.

New 5-year TIPS gets real yield of 1.182%

Investor demand appeared to be lukewarm. By David Enna, Tipswatch.com The U.S. Treasury’s auction offering of $26 billion of a new 5-year Treasury Inflation-Protected Security — CUSIP 9…

tipswatch.com

Now I'm debating if I'll participate in the 10-year TIPS auction in January. I was originally planning on an 8-year ladder and now I'm at 9-years. Adding another year could make it easier to manage, but I don't want to sacrifice my equity allocation.

I'll likely see how markets are doing at the time. If equities are up, then odds are higher I'll sell and buy TIPS, otherwise I'll ride it out.

 

[Chuckanut]

The new Ibond fixed rate is now below 1%, only 0.9%. Not so good.

 

[audreyh1]

The new Ibond fixed rate is now below 1%, only 0.9%. Not so good,

Ahah! Where is this info published on Oct 31 and April 30, seemingly 1 day in advance of the official announcement?

 

[Chuckanut]

Ahah! Where is this info published on Oct 31 and April 30, seemingly 1 day in advance of the official announcement?

I read the info from the TIPSWatch email. He's usually spot-on with Ibond rates.

FWIW, while I am disappointed with the reduction in the fixed rate, an Ibond at 0.9% will still earn over 4% for the next six months. My older 1.3% Ibonds will be earning about 4.3% which is very competitive in today's market.

 

[Koolau]

Chuckanut, thanks for the sneak-preview!

 

[Mulligan]

Chuckanut, thanks for the sneak-preview!

Treasury Direct posted it on their website.

Home — TreasuryDirect

www.treasurydirect.gov

I agree with Chuck, Im not chasing below 1% and I already hit up a few friends for the last round up of the 1.1% via the gifting process. So between these and the more 1.3% and 1.2% Fixed I bought, Im probably tapping out here. Unless in 2 years I need to hide some more money to keep my Medicare premiums down. Probably will go the MYGA route there instead when the time comes.
Series EE was dropped to a pitiful 2.5%, which was down from an already embarrassing 2.7% previously.

 

[audreyh1]

Ah, ok, so Treasury Direct announces the new rates on April 30 and October 31. I never realized that.

 

[Mulligan]

Ah, ok, so Treasury Direct announces the new rates on April 30 and October 31.

I think they started doing it this way a few cycles ago…I think anyways, ha.

 

[audreyh1]

I think they started doing it this way a few cycles ago…I think anyways, ha.

Yeah, it probably changed because way back I remember announcements being May 1 and November 1.

 

[Chuckanut]

I decided to jump into the Thursday 5 year TIPS reopening. Not 100% of my dry powder since the rate of 1.4% is low compared to earlier this year. But, it fills a gap in my ladder in the area of late 2030 and early 2031.

Also, the 10 year TIPS in January is coming up with a higher fixed rate than the 5 year. I’ll need some dry powder for that. Perhaps it will be closer to 2% plus inflation? Maybe.

 

[tulak]

I decided to jump into the Thursday 5 year TIPS reopening. Not 100% of my dry powder since the rate of 1.4% is low compared to earlier this year. But, it fills a gap in my ladder in the area of late 2030 and early 2031.

Also, the 10 year TIPS in January is coming up with a higher fixed rate than the 5 year. I’ll need some dry powder for that. Perhaps it will be closer to 2% plus inflation? Maybe.

I should have waited two months! I got 1.182% for the same 5-year TIPS bought at auction in October.

I'll likely participate in the 10 year TIPS auction, but still figuring out for how much. I'll be eligible for SS in 10 years - at 62 - so I might reduce the amount of TIPS I buy to offset what I'll collect for SS if I take it at 62, which will probably only happen if SHTF, otherwise I will wait.

 

[Chuckanut]

I should have waited two months! I got 1.182% for the same 5-year TIPS bought at auction in October.

I'll likely participate in the 10 year TIPS auction, but still figuring out for how much. I'll be eligible for SS in 10 years - at 62 - so I might reduce the amount of TIPS I buy to offset what I'll collect for SS if I take it at 62, which will probably only happen if SHTF, otherwise I will wait.

FWIW, in today’s WSJ (12/26) one columnist opines that in November 2024, the long term inflation goal became 3%. (What!! Nobody told us?). If that is correct, that is well over the break even rate when comparing it to ordinary 5 year treasuries.

 

[audreyh1]

FWIW, in today’s WSJ (12/26) one columnist opines that in November 2024, the long term inflation goal became 3%. (What!! Nobody told us?). If that is correct, that is well over the break even rate when comparing it to ordinary 5 year treasuries.

They don’t know that. They are simply speculating which is why nobody told us that.

 

[tulak]

I’m fine if TIPS don’t break even with treasuries. I’m buying them for insurance against inflation. I figure in the worst case, they wouldn’t trail by more than a 1% or so, which is negligible in the overall portfolio.

 

[Koolau]

FWIW, in today’s WSJ (12/26) one columnist opines that in November 2024, the long term inflation goal became 3%. (What!! Nobody told us?). If that is correct, that is well over the break even rate when comparing it to ordinary 5 year treasuries.

Could be a "Trail Balloon" leaked to WSJ - just to test the waters.

Honestly, doesn't sound trustworthy to me.

 

[gromit]

As recently as 12/10/25, Jerome Powell stated: “Everyone should understand, and the surveys show that they do, that we are committed to 2% inflation, and we will deliver 2% inflation.”
(That quote was from the post-FOMC meeting press conference.)

Of course, quotes from any source are never guaranteed to come to fruition.

 

[MichaelB]

They don’t know that. They are simply speculating which is why nobody told us that.

I agree

 

[tulak]

Submitted an order for today's opening of the 10-year TIPS auction. This is the 8th TIPS step in my 9-10 year ladder (the first 1-2 steps are a treasury/MM fund). At this point, I'll start building out each step in the ladder instead of adding years, assuming I add more.

Here's a tipswatch article for the 10-year TIPS that matures today, Jan 15th: A 10-year TIPS is maturing Jan. 15. How did it do as an investment?

Data from Eyebonds.info show this TIPS generated a 10-year nominal annual return of 3.902%, easily exceeding the comparable nominal Treasury at 2.03%. For its time, CUSIP 912828N71 was a very good investment.

The 20-year TIPS that is maturing did not do as well against the 20-year treasury.

At the time, a 20-year Treasury bond was yielding 4.63%, giving this TIPS an inflation breakeven rate of 2.59%. Over the last 20 years, annual inflation has averaged 2.51%, and this TIPS will end up providing a nominal return of 4.512%, slightly below the nominal Treasury.

But I wouldn't sweat a 0.118% difference.

 

[pb4uski]

As recently as 12/10/25, Jerome Powell stated: “Everyone should understand, and the surveys show that they do, that we are committed to 2% inflation, and we will deliver 2% inflation.”
(That quote was from the post-FOMC meeting press conference.)

Of course, quotes from any source are never guaranteed to come to fruition.

I suspect that he believes it. Personally, I think 2% is a bit too low, but 3% is too high. I think a stated target of 2-3% would be a better way to frame it and would make it more mysterious so as to keep the Fed watchers guessing.

That said, I support an independent Federal Reserve [mod edit]

 

[tulak]

Today’s 10-year TIPS auction has a real yield of 1.940% with an inflation breakeven of 2.31%. I’m happy with that result and another step in the ladder done.

In a volatile week, auction of new 10-year TIPS gets a real yield of 1.940%, a nice result for investors

By David Enna, Tipswatch.com All week, I have been calling today’s auction of $21 billion in a new 10-year Treasury Inflation-Protected Security — CUSIP 91282CPU9 — the hardest to…

tipswatch.com