What Will the I-Bond Interest Rate Be in November 2022?

August 27, 2022

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9:00 pm

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22 comments

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Economics

Image from Diamond NestEgg (DNE) video with Mish alternate calculations

I Bond Interest Rate November 2022 Prediction

Assuming a base fixed rate of 0%, the formula for the next I-bond rate is ((September CPI-U Minus March CPI-U) Divided by March CPI-U) * 2.

The CPI numbers are unadjusted.

DNE estimates a whopping 12.4% annualized yield. I arrive at 7.9%.

The difference is in CPI projections. DNE assumed 1.0% inflation for July, August, and September.

We already know July was 0.0% (technically slightly negative).

The Cleveland Fed projects 0.09% month-over-month inflation for August. My assumption based on utilities and rent, with gasoline mostly flat is 0.40%.

For lack of a better number, I used 0.40% for September as well.

Mish vs DNE CPI Projections

July (subject to revision) is a known value. Tacking on 0.40 percent to July and then again for August yields a CPI-U of 298.851.

Plugging that into the lead chart formula gets an annualized yield of 7.9%. That far under DNE’s calculation but a very nice yield that everyone should take advantage of.

I-Bond Details

The limit for purchasing I-bonds is per person, so a married couple can each put up to $10,000 in the investment annually, or up to $15,000 each if they both also elect to get tax refunds in paper I-bonds.
Also, you can purchase I bonds for each child and if you have a trust, the trust can buy them.
An investor must hold the bonds for 12 months, and if they sell the bonds before five years, they lose three months of interest.
You must hold the bonds for 5 years to collect all of the interest and the rates will change semi-annually.

Treasury Direct has more details on Buying Series I Savings Bonds

In a calendar year, you can acquire:

up to $10,000 in electronic I bonds in TreasuryDirect
up to $5,000 in paper I bonds using your federal income tax refund

Is it worth the hassle given the above limits?

I think not and they make great gifts. But hassle is in the eyes of the beholder.

This post originated at MishTalk.Com

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22 Comments

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dtj

1 year ago

I bonds were a terrible investment up until a year ago. Suddenly they are yielding the highest safest yields right now. Good thing they capped the limit at $10,000, otherwise the stock market would be down -50% (or more) instead of -10%.

phil

1 year ago

I think so, not I think not.

8dots

1 year ago

For entertainment only. Household assets – stocks, RE, bonds – are down, along with oil prices, with higher interest rates and taxes . That’s deflationary. Nov I bond coincide with Nov election. 1) JP Volcker pain might be Santa in Aug. 2) Inflation m/m ROC might be negative for Nov election. Possible projection : (-) 0.50% in July, (-) 1.40% in Aug and (-) 1.1% in Sept for a total of (-) 3%, or 293.311 in Sept. // [293.311 – 287.504] : 287.504 x 2 = 4%.

The dem will take the senate and the house, because SPX reach 4,500 in Oct, 2K for u and me, $20K student loans jubilee and annual I bond rate of 4%.

Ron Cataldi

1 year ago

Current rate on my I Bonds issued 06-01-2021 is 9.62%. So Mish is predicting this rate will fall? I don’t get it.

MPO45

1 year ago

Reply to Ron Cataldi

Just keep doing what works for you. I too am stuffing cash into I-Bonds everywhere I can: spousal accounts, kid accounts, etc. People don’t seem to understand that 9.62% (ibond rate) – 8.5% (inflation rate) = real return of 1.12% but at least that’s a positive number. Almost everything else is negative these days. Most people CAN’T afford to do this but they should they just don’t understand their inflationary predicament.

shamrock

1 year ago

Reply to Ron Cataldi

The interest you receive adjusts every 6 months. You will get your 9.62% for 6 months, but for December it will adjust, probably to the 6-7% range, TBD by the CPI-U for April through September.

Casual_Observer2020

1 year ago

That far under DNE’s calculation but a very nice yield that everyone should take advantage of.

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Most people don’t have that much money laying around. I would say about 95% of the population doesn’t. If there was I-bond mandatory in all 401k and other investment based retirement plans, you would see the stock market drop by 50% or more pretty quickly. This begs the theoretical question, if everyone took all their money and bought I-bonds, what would happen ? The economy would effectively die and there would be mass unemployment because companies would have no operating cash.

Christoball

1 year ago

I almost bought 10K in December, and another 10K in January; but with all the Sabre rattling in DC I am glad I did not fund the war in The Ukraine. I always regret having funded the war in Bosnia.

Casual_Observer2020

1 year ago

Reply to Christoball

Do you think the US budget is balanced or something ?

Christoball

1 year ago

Reply to Casual_Observer2020

I wasn’t compelled to buy iBonds so I didn’t. My money and time made more than 9% elsewhere so I was blessed with active income.

Captain Ahab

1 year ago

Reply to Christoball

All of the taxes collected at the Fed. level, and an extra trillion or so every year, fund all of the wasteful programs of the Fed. Gov’t, including, but not limited to:

giveaways to other countries, supporting illegal aliens, pseudo-scientific theories, woke education, funding Chinese labs creating Covid, overgenerous pensions, junket trips overseas….

Christoball

1 year ago

Reply to Captain Ahab

Yeah those too!!!!

dunnma

1 year ago

Reply to Christoball

Better funding the war in Ukraine than funding one that’s fought here.

Bam_Man

1 year ago

The Fixed Rate component of the overall I-Bond interest rate will be updated in November, and will likely be slightly higher than the current fixed rate of zero. However there is no set formula/index for the fixed rate component. The fixed rate component is strictly at the discretion of the Treasury Department. There is no way that I-Bonds will be yielding anywhere near 12.4% anytime soon – much less later this year.

Captain Ahab

1 year ago

Reply to Bam_Man

Very little of Fed Gov’t expenditures add to the national health/wealth. Given gov’t low productivity and poor decision making about 80 cents of every dollar spent is actually ‘productive’. It doesn’t matter if we are talking about national parks, the IRS, education, military… In the private sector, of every dollar spent, the ‘productive’ value is about $1.20. Privatizing gov’t activities generates a 50% net gain!!! Yet another reason to be against big government.

Captain Ahab

1 year ago

Reply to Captain Ahab

Oops. Supposed to be a comment to Christoball, above

Christoball

1 year ago

Reply to Captain Ahab

Yes, governments are a public employee retirement and health benefits company a war machine, revenue machine, and surveillance team attached to it.

MPO45

1 year ago

I have been loading up in I-Bonds because I think inflation will continue to climb. I fully expect a temporary decline in inflation but there are too many headwinds that will bring it back up: Winter freeze in Europe, demographics -> labor shortages, de-globalization, and supply chain issues.

To add further there are threats of rail strikes that will disrupt supply chains, unionization drives everywhere, “quiet quitting,” and climate issues such as drought in the west and China. Throw in a hurricane, Putin escalations, or other black swan and we’re off to the inflation races.

I try to think about what will cause inflation to magically decline and the only thing that comes up is JPow rising rates aggressively to 6% or higher. Any demand destruction that comes will likely be temporary as the world population hungers for more and world governments just print more money.

We’ll see what happens over the next 12 months.

Casual_Observer2020

1 year ago

Reply to MPO45

Any demand destruction that comes will likely be temporary as the world population hungers for more and world governments just print more money.

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I think Powell channeled that this is not a possibility in his speech. There is going to mass pain this time around imo and at some point before 2030, there is going to be a nuclear war imo.

MPO45

1 year ago

Reply to Casual_Observer2020

I saw on TV and read everything JPow said and he can say whatever he wants but he is not master of the universe and he can’t change human behavior, all he can do is fudge with the money supply. It won’t surprise me if people start “quiet quitting” currencies and start bartering which would be free of taxation and inflation.

JimmyTullips

1 year ago

Reply to MPO45

I tried buying gas with some old Nike shoes and it didn’t work

shamrock

1 year ago

Gasoline flat? I don’t know where you come up with that idea. It has dropped by 8% so far in August, so maybe an average price drop for the month of 5%. August CPI will probably be 0. Assume September at 0.4% that gives a total 6 month increase of 3%, making the i-bond rate 6%.

What Will the I-Bond Interest Rate Be in November 2022?

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