I maxed out our I-Bond purchases in the 4th qtr 2021 and 1st qtr of 2022 & 2023.
Should I bail this year? It’s in our short-term cash holdings.
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I sold my I-Bonds which had current interest rates of 3.38% and 3.48%. I’m going to use the proceeds to fund my early retirement ladder, I’ll be buying a US Treasury maturing 12/31/2026, yield to maturity of about 4.4%. It just didn’t make sense to hold the those low interest I-Bonds which I bought in 2015 2016 when the fixed part of the interest rate was 0%.
That said, I’m going to buy new I-Bonds with the higher fixed rate to partially replace them. So although my I-Bonds holdings will be getting smaller, they will carry a better total interest rate.
I have changed my mind. I was going to sell low fixed interest I-Bonds and buy the new ones with a higher fixed rate. Now I think I’m going to hold onto all of them, and buy the new ones before May 1, 2025. Since everyone is limited to $10,000 per year per person (unless you do the gift box thing), I don’t want to let go of bonds I might want later. If we get an inflation spike, the increase of the variable part alone of the I-BOND rate will be welcome.
My reasoning is that I see more inflation coming. Tariffs, sending workers back to their home countries. Also large deficits mean the US Treasury has to issue more bonds, but investors will want higher rates on the longer dated bonds, like the benchmark 10 year, which influence mortgages. 10 year yields going up this week, mortgages going up this work, housing affordability getting worse. The FED doesn’t control any of that. The bond vigilantes do.
If someone else has a different take on inflation, let’s hear it. But I don’t see it abating, of course a recession will cool it down.