What’s problematic about the May inflation report? What might this mean for the November I-Bond variable rate & the November I-Bond fixed rate? Plus why are we considering buying some 5-Year TIPS in the upcoming auction? Those are the three questions I’ll be answering in today’s video.
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November 2023 I-Bond Rate Prediction | Why Buy TIPS Now (Treasury Inflation-Protected Securities)
As we approach November 2023, investors and financial analysts are eagerly awaiting the announcement of the I-Bond rates for the upcoming period. I-Bonds, or inflation-adjusted savings bonds, are a popular investment option for those seeking protection against inflation while earning a safe return. In this article, we will discuss the potential rate prediction for November 2023 and explore the reasons why investing in TIPS (Treasury Inflation-Protected Securities) might be a wise choice.
Before diving into the prediction, let’s understand the basics. I-Bonds are issued by the United States Treasury Department as a means to help individuals protect their investments from the erosive effects of inflation. The interest rate on I-Bonds is composed of two components: a fixed rate set at the time of purchase and a variable rate that adjusts every six months to reflect changes in inflation.
Now, let’s delve into the prediction for the November 2023 I-Bond rate. It is important to note that predicting interest rates is a challenging task, as they are influenced by various economic factors, including inflation expectations, monetary policy decisions, and market conditions. However, some analysts believe that the November 2023 I-Bond rate will experience a modest increase compared to previous periods.
The prediction is primarily based on the current economic climate and inflation expectations. As global economies recover from the impacts of the COVID-19 pandemic, central banks around the world are likely to adopt a more hawkish stance, aiming to control inflationary pressures. This may result in higher interest rates, and consequently, an upward adjustment in I-Bond rates.
So, why should investors consider purchasing TIPS now, especially in anticipation of potential rate increases?
First and foremost, TIPS offer protection against inflation. Unlike traditional fixed-income investments, where the interest payments remain constant regardless of inflation, TIPS adjust their principal value and interest payments with changes in inflation. This ensures that investors receive a real rate of return, protecting their purchasing power.
Furthermore, TIPS are backed by the United States government, making them extremely safe investments. As they are issued by the Treasury Department, they carry minimal default risk, making them an attractive option for risk-averse investors.
Moreover, TIPS provide diversification benefits to an investment portfolio. As their returns are not directly correlated with the performance of stocks and bonds, TIPS can serve as a hedge against volatility in other asset classes. They can provide stability and act as a defensive investment during periods of economic uncertainty.
Lastly, TIPS can act as a valuable addition to retirement portfolios. With longer life expectancies and potential increases in healthcare costs, investors need to safeguard their investments against the eroding effects of inflation over time. TIPS can provide a steady stream of income during retirement, ensuring a comfortable standard of living.
In conclusion, the prediction for the November 2023 I-Bond rate suggests a potential increase based on current economic conditions. Buying TIPS (Treasury Inflation-Protected Securities) offers several advantages, including protection against inflation, safety backed by the U.S. government, diversification benefits, and suitability for retirement portfolios. As with any investment decision, it is crucial to conduct thorough research, consult financial professionals, and consider personal financial goals and risk tolerance.
what about a tips/bond index fund from a brokerage like Fidelity. We need a video!
I didn’t see the prediction for the 2023 year in total. I’m assuming around 3.5 percent ?
Gasoline has gone up in my town, not down.
6% CD from Old North point is backlogged. They don't take application now.
The problem of charts showing a downward trend in inflation is that it gives a false impression that prices are going down.
A 10% increase followed by a 4% increase, doesn’t mean the overall price has come down. It’s the opposite- prices are still going up.
100 dollars with a 10% increase means 110 dollars. A 4% increase after means 110 x 1.04 = 114.4.
Note that while the rate lowered, the number increased in a compounded fashion.
Inflation compounds…..unfortunately.
This is the Beauty Of I-Bonds (and EE Savings Bonds) They are the Only Bonds that compound. All others are a flat rate.
Excellent. Thank you. Are TIPS taxed the same way the I-Bonds are?
I did buy 2 I bonds. What bothers me is if I die will my kids have a problem getting the I bonds funds? The site says you can name beneficiaries but I don’t know how to do it. So right now there are no beneficiaries
Wonder what inflation does when JPowell eventually cuts rates or oil increases in price. Additionally they will have to print dollars to service the new debt issued at elevated rates, won’t that devalue the currency more so and perpetuate inflation. Or if they throw in the towel on 2 percent and essentially says 3 percent is the new normal. All of those factors make me wants to stay put in Ibonds.
So with that example the 5yr tips being around 6%, if i buy it will it be 6% all the time, 2023, 2024, etc;? I know I bond rate changes, but is the TIPS rate locked when you buy it, even if inflation drops to say 2%?
Another great video! It looks like the TIPS offer is out there on the Fidelity Web pages so I’m signing up! Can you give me a URL that shows how real rates for TIPS is tracking? You seem to have one on your video. Thanks
New question Jennifer. All you have to do is Google “Best Cd rates”, and so many sites pop up . Yet many list cds that others don’t.Are they paid advertisers?
The government's inflation numbers are cooked either way.
Why is this better than just using that money for the stock market instead?
Thanks for the insight.
To change the subject–with S&P 500 now at 4400, what's the move for people who were anticipating it going into the 3000s before buying? Did they miss the boat? Is there still a decent dip on the near horizon for a buying opportunity or is this 1987 all over again with huge returns to occur over a decade which will leave behind those who don't get in at current levels?
Doesn’t sound like you are concerned that artificial intelligence may lead to deflation in 5-10 years.
Thank you Jennifer, great video and explanation as always. I saw another channel saying essentially the same thing about the real rate now for TIPS vs IBONDS, but I could not understand what they were talking about, which was all cleared up with your video. I look forward to seeing how to consider individual TIPS by your actions on the current 5-year TIPS on auction on the 6/22. On another note, I'm thinking that buying individual TIPS vs TIPS ETFs are similar to buying individual T-Bills vs a T-Bill EFT, in the way that "the individuals" are more immediate, and therefore purchased at a more current rate than an ETF (which also has an expense ratio attached to it), so you do a little better $, but it takes more time. Is that right?
Thank you for your videos. Inflation is still around 8%. Government is just manipulating the rate to make things sound better.
~13:00 But what if the 5 year TIP’s adjustment for inflation becomes a low number like 2%? Then the 5 year treasury note wins. I must be missing something.
I'm curious what you think the impact will be when people finally start paying their student loans after over 3 years.
Your videos are excellent. I congratulate you. I’m glad you added the comment about past performance vs. future results. But one thing you said puzzles me: your feeling of an impending recession. Could you please elaborate on your next video?
Latest inflation report is fake… it's no way inflation went down to 4%
Might want to *NOT* use the White House as a source on *ANYTHING* … just sayin' … cause that "I-Bond Memory Lane" chart might as well be named "White House Memory Lane" … and lets see, what happened in January of '21 when CPI-U basically started a straight-up trajectory? Oh yeah, Biden moved into the White House and on first day, he declared war on fossil fuels and that is what started the inflation crisis, quickly followed by Russia attacking Ukraine (take note that Russia didnt invade anybody during the previous Administration). Elections matter – and we are now seeing the consequences of having a party in charge that hates this country and that foreign leaders do not respect. Dont vote based upon culture-wars, vote based upon what is best for this country and your pocket-book.
TIP auctions the same as tbills?
What is that supposed to be good news…. the compound inflation is still greater than zero… prices continually go up and they are going up more than it was 4 months ago – which were high before.
I’ve never been interested in TIPS but this video has me intrigued
Thanks for the great video. please let us know your decision on this TIPs release on 6/22/23 right before the end of the auction date.
I would find buying US treasuries on the secondary market on fidelity would be very useful. I am looking a 20 and 30 year bonds. Also how to sell them etc.
I have to learn how to buy tips on fidelity
Hello, Any update on TIPS?