IBond interest payment

Minor question (not a problem):

I bought an IBond a little over a month ago and am wondering, when does the interest earned show up in the account(at TreasuryDirect)?

I see a comment on one of their pages: “Interest, if any, is added to the bond monthly and is paid when you cash the bond” but, I’ve had the bond for more than a month and no interest is shown.

Any thoughts?

When are earnings added to the I bond?

I bonds increase in value on the first day of each month, and interest is compounded semiannually based on each I bond’s issue date. An I bond’s issue date is the month and year in which full payment for the bond is received.

https://www.treasurydirect.gov/indiv/research/indepth/ibonds…

Does the interest earned each month actually show up in some manner in the TreasuryDirect account?

If so, why don’t I see anything for the bond that was purchased in December?

Interest on your December I Bond won’t appear in your account until April 1st
since there is a 3-month interest penalty if sold within the first five years.

We bought our maximum amount in October so our first interest should show up
on February 1st.

Thank you, auslander. I’ll just keep an eye on things.

We bought our maximum amount in October

I’m curious, why did you buy in October? Didn’t the rate get reset (much higher) in November?

(I meant to buy in November, but was away for Thanksgiving week and then time got away from me, so I missed November and bought instead in December.)

I’m curious, why did you buy in October? Didn’t the rate get reset (much higher) in November?

Not the person you asked the question of, but by buying in October, they locked in a 3.54% annual rate for the first 6 months, and then get the 7.12% annual rate that they would have gotten by purchasing in November for the next 6 months. So, they basically guaranteed themselves an additional 6 months of higher than market rate interest by buying in October rather than waiting until November.

AJ

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Not the person you asked the question of, but by buying in October, they locked in a 3.54% annual rate for the first 6 months, and then get the 7.12% annual rate that they would have gotten by purchasing in November for the next 6 months. So, they basically guaranteed themselves an additional 6 months of higher than market rate interest by buying in October rather than waiting until November.

That makes a lot of sense. Thanks for the explanation!

And now, of course, I remember some discussion about that back in September/October (is it better to take the sure 3.54 plus the 7.12 (we now know), or to take the 7.12 plus some unknown number for the next six months).

is it better to take the sure 3.54 plus the 7.12 (we now know), or to take the 7.12 plus some unknown number for the next six months

The thing is - after the first 5 months, for 29.5 years, those who bought in October will get the exact same interest rates as those who bought in November - it will just be added to their bond 5 months later. It’s not until the last 6 months of the November buyer’s bond that they will possibly get a different rate. And I don’t know anyone who is predicting what rates will be in 29.5 years.

AJ

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The thing is - after the first 5 months, for 29.5 years, those who bought in October will get the exact same interest rates as those who bought in November - it will just be added to their bond 5 months later. It’s not until the last 6 months of the November buyer’s bond that they will possibly get a different rate. And I don’t know anyone who is predicting what rates will be in 29.5 years.

I think many people look at this batch of I-bonds, not so much as a 30-year bond, but rather as a 5-to-30-year bond with a “put option” attached to it. That’s because a long-term real return of 0% isn’t particularly good, even for a very safe fixed income investment. Now, if deflation appears and persists, then perhaps you end up with some positive real return, but if that happens, you have other problems to deal with. Now this doesn’t apply to my vintage 2000/01 I-bonds at 3%+inflation, because a 3% real return for a very safe fixed income investment is quite acceptable.

So, even if only in their minds, many may look at the 5-year estimated yield on this batch of I-bonds. I say “only in their minds” because I am cognizant that some people (perhaps including me) buy such investments and simply hold to maturity by default because they never look at them regularly.

Certainly if I-bonds sometime in the next 30 years are issued with a fixed rate of some sort (maybe not 0.1%, but perhaps 0.5%) it would be a no brainer to simply cash in these I-bonds (as much of them as possible in those years) and buy the new ones with a positive fixed rate attached. This is especially true if you happen to be able to use the unusual tax benefit (education expenses) of I-bonds at the time.

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