I bonds are a sort of U.S. savings bond made to guard against inflation and preserve the value of your money. Investor demand in higher-yielding, lower-risk investments is growing as a result of inflation reaching four-decade highs, and I bonds suit the bill.
I-bond interest rates are currently 9.62%. Up to October 2022, the next six months will be charged at that rate.
According to Steven Jon Kaplan, CEO of True Contrarian Investments in Kearny, New Jersey, “Today’s I bond yield substantially exceeds that of any other government-guaranteed interest rate offered from any bank, brokerage, or other insured source.”
The formula for the following I-bond rate is ((September CPI-U Minus March CPI-U) Divided by March CPI-U)* 2. This is based on a base fixed rate of 0%.
The CPI figures are not modified.
DNE predicts a staggering yearly yield of 12.4%. I calculate 7.9%.
The CPI predictions are different. For July, August, and September, DNE projected inflation of 1.0%.
Knowing that July’s percentage was 0% (technically slightly negative).
The Cleveland Fed forecasts August monthly inflation of 0.09%. Based on rent and utilities, I’m assuming a 0.40% increase in gas prices.
For lack of a better number, I used 0.40% for September as well.
The bond markets forecast that Americans will see prices in April 2027 that are about 20% higher than they are today.
Fears that the United States is entering a protracted period of high inflation reminiscent of the mid- to late 1970s have been sparked by the CPI print of 8.5% in March, the highest reading in more than four decades. However, the knowledgeable investors who place wagers on the direction of inflation hold a totally different perspective. They do anticipate that the current trend of mid- to high single digit growth will continue for the majority of 2022. But after that, the markets anticipate a tapering to somewhere around the 2% area (which is actually lower than the average for the five years before to the COVID’s beginning).
Sounds comforting, doesn’t it? Actually, no. The price of groceries, rent, airfare, gasoline, and the majority of the commodities on families’ shopping lists will rise sharply above pre-pandemic levels as a result of the jackrabbit leaps, which will continue well into 2023. The bond markets forecast that even while inflation will start to decline from that point on, Americans would still experience prices in April 2027 that are almost 20% higher than they are right now. That is a twofold increase over the five years before the outbreak. Additionally, if the Fed moves too slowly and inflationary expectations are cemented, the markets may be overly optimistic and the cost-of-living plateau may rise even further.Despite being a one-time event, the price increase would still be significant, according to Florida Atlantic University economics professor William Luther. If the Fed keeps pursuing an expansionary monetary and fiscal policy, which the markets don’t anticipate, high inflation won’t last indefinitely. But he points out that the unexpected blow to family budgets is very real.
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History of I Bond Rates!
Heres a graph that depicts the history of I bond rates.