US Series I Savings Bonds Now Yielding 7.12%

This doesn&#x27;t mean what people think it means. They adjust the inflation rate every 6 months <a href="https:&#x2F;&#x2F;www.treasurydirect.gov&#x2F;indiv&#x2F;research&#x2F;indepth&#x2F;ibonds&#x2F;res_ibonds_iratesandterms.htm" rel="nofollow">https:&#x2F;&#x2F;www.treasurydirect.gov&#x2F;indiv&#x2F;research&#x2F;indepth&#x2F;ibonds...</a> .<p>Right now it yields 7.12% because the last inflation number was really high, but once inflation goes back to normal, the yield will be much lower.

I Bonds are inflation protected bonds, so the context here is that the high yield on these bonds reinforces the reality that inflation (whether temporary or long-term) is here.

So I registered for an account just now. Most interesting part was when I had to login. You have to use a Web UI keyboard (i.e. buttons arranged in a keyboard), to key in the password. I use a pw manager, so that would be annoying.<p>Ended up doing inspect element, and deleting the readonly attribute. That worked. Super weird.

I&#x27;m kind of an idiot with anything terribly elaborate in the financial world, so forgive a bit of a dumb question: what are the <i>downsides</i> to bonds instead of using something like a CD?

I bought one in the early 2000&#x27;s, should be getting about 10% on it. The trouble with these is that the fixed rate has been 0% for some time now. If inflation does go down you could end up with a very low yielding bond. I forget what exactly it equates to on a yearly interest basis but series E bonds don&#x27;t really pay squat until they hit the 20 year mark, at which time they are guaranteed to double. I wish when I was younger I had put the max into those each year I was able to, that&#x27;s a nice little &quot;pension&quot; when you are older.

I think a lot of people who have never seen inflation think that 10% is &quot;hyperinflation&quot;. Please look deeper into 20s Germany, 90s Eastern Europe, 2010s Venezuela, etc.<p>Inflation doesn&#x27;t just go from 1% to 1000% in a year, it has its own growth rate and takes years to develop. If you&#x27;re worried about inflation, you should be looking at yearly growth, like 5% this year, 10% 2022, 20% in 2023, etc. This became a problem in those places because for various reasons, those societies were utterly dysfunctional and could not react and contain it.

7% is likely a negative real rate at the moment.

The fixed rate is 0% as has been the case. The inflation yield rate has been bouncy. This doesn’t seem as good as the title and comments are making it seem unless things stay this way. Table near bottom of page shows the inflation rate over time.<p>Edit: I agree this could be a sign of something long term<p>Edit: recent history of rates<p>-- Inflation rates --<p>Nov 2021 3.56%<p>May 2021 1.77%<p>Nov 2020 0.84%<p>May 2020 0.53%<p>Nov 2019 1.01%<p>May 2019 0.70%<p>Nov 2018 1.16%<p>May 2018 1.11%<p>Nov 2017 1.24%<p>May 2017 0.98%<p>Nov 2016 1.38%<p>May 2016 0.08%<p>Nov 2015 0.77%<p>May 2015 -0.80%<p>-- Fixed Rates above 0 or .1% --<p>Nov 2019 0.20%<p>May 2019 0.50%<p>Nov 2018 0.50%<p>May 2018 0.30%<p>The overall rate can&#x27;t go below 0% The formula is: fixed rate + (2 * inflation rate) + (fixed rate * inflation rate)<p>So for these 6 months: 0 + (2 * 0.0356) + (0 * 0.0356)] = 0.0712

Is their site right that the maximum yearly purchase is $5k&#x2F;$10k paper&#x2F;electronic? That&#x27;s... not very much.

I have an Ally bank account. Over the past couple years, they&#x27;ve been great about religiously informing me of my interest rates dropping to almost zero. I see something like this and just have to laugh. When will I get my increase notification?

For reference: - I-Bonds base inflation off the CPI-U index<p>- CPI-U for 2020-2021 is around 5.4% and this table breaks down the different areas it measures: <a href="https:&#x2F;&#x2F;www.bls.gov&#x2F;news.release&#x2F;cpi.t01.htm" rel="nofollow">https:&#x2F;&#x2F;www.bls.gov&#x2F;news.release&#x2F;cpi.t01.htm</a><p>- And some info on the CPI-U: <a href="https:&#x2F;&#x2F;www.investopedia.com&#x2F;terms&#x2F;c&#x2F;cpiu.asp" rel="nofollow">https:&#x2F;&#x2F;www.investopedia.com&#x2F;terms&#x2F;c&#x2F;cpiu.asp</a><p>From looking at the 2020 - 2021 breakdown, and if I am interpreting this correctly, the biggest single category change is in energy at almost 25% with a contribution of ~1.81% to the index.

These are non-marketable composite-rate bonds. Safe inflation protected investment. Yield can&#x27;t go below 0% even with deflation.<p>If you want to see what market thinks, follow:<p>Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Inflation-Indexed <a href="https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;DFII10" rel="nofollow">https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;DFII10</a><p>Currently at -1%

This is not a great investment. It&#x27;s pays it&#x27;s base rate (0.0%) plus inflation (7.12%). The rate is based on inflation and is reset every 6 months, and I&#x27;m assuming the base rate of (0.0%) doesn&#x27;t change. It may make sense for some people who are risk-averse and already have savings in a bank account that is getting demolished by low rates and high inflation.

Sadly Treasury Direct excludes U.S. citizens living abroad. If you do not have an address of record in the U.S. you may not create a Treasury Direct account. Interestingly though they have no such condition on taxation of my income in my current of permanent residence!

For those of us who were confused (like me), this is <i>not</i> a treasury bond, but a real return bond. It pays interest based on a posted rate, plus additional interest to cover inflation for a period. The inflation rate will change twice a year based on inflation.

This yield means we are expecting much higher inflation than normal. The 2% target was missed.

Any real risk in dumping 10k in these and forgetting about it for a decade.<p>Have these ever lost money ?<p>7% yield is outrageously good assuming you can&#x27;t lose money. Then again US currency might be worthless if they default on these.

Does anyone want to explain why this is an interesting story?

Not responding; has HN DDOSed the US treasury?<p>Explainer from a different page: <a href="https:&#x2F;&#x2F;www.investopedia.com&#x2F;best-savings-bonds-5196440" rel="nofollow">https:&#x2F;&#x2F;www.investopedia.com&#x2F;best-savings-bonds-5196440</a> which had the rate of 3.54% as of August. Presumably it&#x27;s shot up due to inflation estimates. In which case you should probably buy some immediately if you have spare cash and want a risk-free return and meet the other criteria.<p>I used to have the UK equivalent until the particular product was phased out, but it appears that a newer version is available.

Inflation is scaring me even more now.

Inflation rate is just over 5% so that makes the composite rate -4% (or 0).

7.12% for Treasury bonds is great but you can get 17-21% with USDC stable coins (crypto).<p>On Kucoin you can make money by lending out stablecoins to margin traders. Here are some of the current rates:<p>Lend USDC for 7+ days: 17.52%<p>Lend USDC for 14+ days: 20.44%<p>Lend USDC for 28+ days: 20.80%<p>Margin lending is safer than most other forms of lending because margin loans are fully collateralized and if the borrower gets a margin call, their assets are auto-liquidated to pay you back. In the rare event that the system couldn’t get back all of the collateral, the difference is paid out from an insurance fund that about 10% of interest is paid into.<p>Benefits: 1) interest is paid out daily and can be (automatically) reinvested. 2) your investment can be pulled out in 7-28 days or less if the borrower pays you back earlier. 3) there is no interest forfeit penalty that these bonds have.<p>Drawbacks: I don’t think there is any 7% yielding asset in the world that is as safe as a US government bond.<p>Disclosure: I don’t do this myself, hold many bonds, or keep much cash. This is a financial suggestion but it is not a financial recommendation. Do your own research.