The reason is that TIPS bonds are marketable, and the price adjusts. If a TIPS was issued with a 1% yield and current TIPS yields are 2%, the old bond will be trading at a discount and will earn the full 2% if held to maturity; selling the old TIPS to buy a new TIPS has no benefit. (Selling would give a deductible capital loss, but the new TIPS will pay more taxable interest to offset the loss.) If an I-Bond was issued with a 1% yield and current I-Bond yields are 2%, the old bond can be redeemed at par (or par minus the early redemption penalty) and replaced with a new bond with a higher yield.It's uncommon to see this attitude with individual TIPS bonds, even when fixed rates for them was not favorable. I Bonds seem to generate much more talk about moving into and out of those positions. Guess the penalty for early redemption may help to fund the program.Dink2win:
Looks like a good plan to me...we sold our 0% fixed rate Ibonds earlier this year...and have to intention of ever buying again unless we get into the unlikely scenario of 0% interest rates and high inflation (but who knows)?
Statistics: Posted by grabiner — Tue Feb 11, 2025 9:46 pm
