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Author: AngelMay Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75777  
Subject: Re: Retirement Invetment Date: 4/12/2006 12:02 AM
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AngelMay asks,

<<The current coupon on I-bonds is only 1.00% vs. the 2.2%-2.4% you can get with TIPS. The 6% yield includes the inflation adjustment. TIPS would return over 1% more than I-bonds with the same inflation.>>

So you think I-Bonds are a bad deal?

Yes, if you have room in an IRA/401k to buy TIPS instead.

I would only buy an I-bond if my IRA was currently invested in 100% TIPS and for some reason I wanted more inflation-protected bonds.

intercst




Then how come the yield on TIPS is less than that of I-Bonds (according to the Treasury Direct website that lists the latest yields)? Is there something I'm not understanding about these reported figures?

Here are the latest for TIPS:

2-YEAR NOTE Interest Rate: 4.625 Yield: 4.730
5-YEAR NOTE Interest Rate: 4.750 Yield: 4.785
9-YEAR 11-MONTH NOTE Interest Rate: 4.500 Yield: 4.760

And for I-Bonds: 6.73%

What am I missing here?


AM
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