Update to the Update on Series I Bonds
Series I bonds may have peaked back when we wrote about them in May of 2022. They were paying a 9.62% rate but have now been reset to 6.89% here in November of 2022. Bondholders are getting a lower rate because inflation growth is slowing, that’s a good thing. A high rate meant high inflation.
In case you need to get caught up on all the rules and short-term history of these, here is a link to our November 2021 article when Series I bonds jumped to 7.12%, and here’s a link to our May 2022 article when they jumped even higher to 9.62%.
Compared to last year, when we first talked about these bonds, regular bonds were still paying next to nothing because the Fed hadn’t raised rates yet. The table below was pulled in early November 2022, where savers probably don’t have to buy Series I Bonds to get a meaningful yield. You can find up-to-date information on yields here.
There’s no cap to the available bonds above. Treasury Direct is painfully difficult to navigate or even access, this might be a great alternative if you don’t mind giving up some yield.
These bonds all have different types of risks and even though there are now worthwhile alternatives, Series I Bonds can still be a good piece of your bond portfolio.
How to Buy These Bonds:
These bonds can only be bought directly from TreasuryDirect.
Another possibility would be to gift these bonds to your children or grandchildren. We pulled the below description directly from treasurydirect.gov.
Electronic Gift Bonds:
To buy an electronic savings bond as a gift:
You must have a TreasuryDirect account
The recipient must have a TreasuryDirect account
You must know the recipient’s:
Full name
Social Security Number or Taxpayer Identification Number
TreasuryDirect account number
You can give gift bonds to adults or children. A child under 18 can have a TreasuryDirect account only if a parent or other adult custodian creates a minor-linked account.
For instructions on how to buy and deliver a gift bond in TreasuryDirect see:
Video on buying
Video on delivering
Two points:
Keep the bonds in your account until you're ready to deliver them.
You must hold the bonds in your TreasuryDirect account for at least five business days before you deliver them to the gift recipient. The five-day hold protects Treasury against loss, by ensuring the ACH debit has been successfully completed before the funds are moved.
When you deliver the bond to the recipient's TreasuryDirect account, the Treasury will send them an e-mail announcing the gift.
Paper Gift Bonds:
When you file your IRS tax return, you can buy paper Series I bonds for yourself or others if you are owed a refund. To buy for someone else, ask for the bond to be issued in the name of the other person.
See our post from November 2021 for additional rules and terms regarding these bonds.
DISCLOSURES:
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
Although bonds generally present less short-term risk and volatility risk than stocks, bonds contain interest rate risks; the risk of issuer default; issuer credit risk; liquidity risk; and inflation risk.
The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information contained above is for illustrative purposes only.
No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.
All investments include a risk of loss that clients should be prepared to bear. The principal risks of CWA strategies are disclosed in the publicly available Form ADV Part 2A.
