The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: VasyaPupkin on September 12, 2013, 07:37:32 PM
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Seeing how the current fixed rate is 0%, what do the esteemed Mustachians think are the chances of it going above 0% next time the rates are announced? I am moving some funds from a 0.1% CD (yes, really...) to either Ibonds or just an online 0.8% account for a bit, so I could wait and see what the new Ibond rates will look like.
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It is administratively set so not very predictable. As far as history goes the highest 10 yr TIPS real yield when a 0% I bond was issued was 1.5%. And the lowest when non-zero issued was 1.3%. So there is uncertainty and they may consider the whole yield curve - 10 year is just and easy ready reference. Current yield is 0.8%. So it would seem we are almost 0.5% away from the rate bumping by 10 or 20 bp.
So possible but not likely?
The opportunity cost of waiting is is three months interest differential between your savings and I bond rates. That's around 0.1%. If the I bond does go to 0.1 you will break even in a year. So I guess no reason not to wait if you plan to hold the bonds a long time.
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Makes sense, thanks!