Comments on: Savings Bond Alert #024 http://www.savings-bond-advisor.com/savings-bond-alert-024/ Sat, 07 Nov 2009 19:44:49 +0000 http://wordpress.org/?v=2.0.4 by: Ken http://www.savings-bond-advisor.com/savings-bond-alert-024/#comment-836 Wed, 20 Sep 2006 16:32:26 +0000 http://www.savings-bond-advisor.com/savings-bond-alert-024/#comment-836 I hope the Treasury won't drop the base-rate even if the inflation rate is very high. The 1.4% is still way below where it use to be back around 2000. I remember when the base-rate dropped from 3.00% to 2.00%. I actually held back on more I-bond purchases thinking it would eventually go up. But based on the recent history at the Treasury, I think your 1-1.4% guess is solid. I'm just hoping for a pleasant surprise. Maybe with the very low demand on savings bonds, there'll be some pressure on the up side. I hope the Treasury won't drop the base-rate even if the inflation rate is very high. The 1.4% is still way below where it use to be back around 2000. I remember when the base-rate dropped from 3.00% to 2.00%. I actually held back on more I-bond purchases thinking it would eventually go up.

But based on the recent history at the Treasury, I think your 1-1.4% guess is solid. I'm just hoping for a pleasant surprise. Maybe with the very low demand on savings bonds, there'll be some pressure on the up side.

]]> by: Tom Adams http://www.savings-bond-advisor.com/savings-bond-alert-024/#comment-826 Fri, 15 Sep 2006 17:52:52 +0000 http://www.savings-bond-advisor.com/savings-bond-alert-024/#comment-826 June - while the Treasury has never announced what its criteria are for setting the fixed base-rate, it's possible to guess a probable range for the upcoming rate. In terms of the low end, they've never set it below 1% in the past and there's no reason for them to do it now. In terms of the high end, two factors come into play. One is the current rate for TIPS, which I discuss in <a href="http://www.savings-bond-advisor.com/series-i-savings-bond-fixed-base-rates/" rel="nofollow" rel="nofollow" rel="nofollow">Series I Savings Bond fixed base-rates</a>. The other is that when the inflation component is relatively high, the Treasury can set the base-rate lower than it otherwise would and still sell lots of I bonds because so few investors understand how the security's interest rates actually work. TIPS are now trading about where they were six months ago, which would indicate the Treasury might offer the same 1.4% base rate as it did six months ago. However, the inflation component will be the second-highest ever, which may cause the Treasury to set the base rate lower than that. June - while the Treasury has never announced what its criteria are for setting the fixed base-rate, it's possible to guess a probable range for the upcoming rate.

In terms of the low end, they've never set it below 1% in the past and there's no reason for them to do it now.

In terms of the high end, two factors come into play. One is the current rate for TIPS, which I discuss in Series I Savings Bond fixed base-rates.

The other is that when the inflation component is relatively high, the Treasury can set the base-rate lower than it otherwise would and still sell lots of I bonds because so few investors understand how the security's interest rates actually work.

TIPS are now trading about where they were six months ago, which would indicate the Treasury might offer the same 1.4% base rate as it did six months ago.

However, the inflation component will be the second-highest ever, which may cause the Treasury to set the base rate lower than that.

]]> by: June Brettler http://www.savings-bond-advisor.com/savings-bond-alert-024/#comment-824 Fri, 15 Sep 2006 16:05:17 +0000 http://www.savings-bond-advisor.com/savings-bond-alert-024/#comment-824 How did you determine that the next fixed base rate is likely to be between 1 and 1.4%? How did you determine that the next fixed base rate is likely to be between 1 and 1.4%?

]]>