Growing demand for ‘inflation-resistant’ I-bonds crashes Treasury Department website

0

So many investors are rushing online to buy Series I Savings Bonds and lock in a rate of 9.62% before the Oct. 28 deadline when a US Treasury Department website selling the securities crashed. Bonds are considered a low risk hedge against inflation.

The TreasuryDirect website froze on Wednesday, while some social media users reported delays in accessing the service and processing their I-bond orders. The delays could prevent some investors from finalizing their purchases before this week’s deadline.

The Treasury Department announced Friday that it will shut down the TreasuryDirect website at midnight tonight until 11:59 p.m. purchases of I-bonds he received this week. On Friday alone, Americans bought $710 million worth of I-bonds, the agency said.

The TreasuryDirect website will reopen for purchases on October 31, when buyers of I-bonds will receive a rate to be published by the agency on November 1. Analysts expect this rate to be considerably lower, at around 6.5%.

With the deadline fast approaching, the Treasury Department is opening more I-bond accounts every day than it typically creates in a year, according to an agency official. The website, TreasuryDirect, has been around for two decades and was not designed for the spike in traffic it is receiving this week, the official added. The Treasury has tripled its capacity to handle the outbreak, but the site is still experiencing slowdowns, the agency said.

I-bonds are generally a niche investment that offers a return based on the consumer price index for all urban consumers, an indicator of inflation. Because US inflation had been at or below 2% for years, they hadn’t provided an attractive return relative to stocks and other investments.

That changed with soaring inflation, pushing the guaranteed rate of return on I-bonds this year to 9.62%. Since the Treasury Department resets the I-bond rate every six months, the next adjustment will occur next month. At this point, the I-bond rate will drop to around 6.5% – still respectable, but less eye-catching than the current rate of 9.62%.

All bonds issued before October 31 will yield 9.62%, but the Treasury said people should order before October 28 to allow for the few days it usually takes to issue a bond, which triggers the run on the market. Treasury Direct website.

I-bonds have significant limitations. First, a person can only buy up to $10,000 worth of bonds per year, with an additional $5,000 allowed if they use a tax refund for the purchase. For married couples, this limit doubles. Parents can also purchase I-bonds for their children (under 18), although they must create separate accounts for each child.

Buyers of I-bonds are also not allowed to redeem them in the first year. After that, you can sell the bond, but that will lose the last three months of interest. After five years, investors can sell without restriction.

Share.

Comments are closed.