Change to I-Bond Recommendations and Holdings May 2023
New I-Bond Interest Rates have posted for May. With inflation continuing to fall, the amount of interest paid to I-bond holders will fall to 3.4%. New I-bonds issued in May will pay inflation plus 0.9%. For a current yield of 4.30%.[i]
How does this change affect your I-Bond strategy?
If you purchased I-bonds during the pandemic when yields where over 9%, it is time to review your holdings. It is possible, some or all of those I-bonds now pay an annual yield of 3.4%. If this is the case, let’s find time in the next 3-4 months to review your short-term savings/ investing / cash strategy.
Interest rates are up and so are bond yields. Given fast changes in the fixed income market driven by short term interest rate increases by the Federal Reserve, short term treasury yields are over 4.6%.[ii] Short term investment grade corporate bonds are yielding over 4% and short-term high yield bonds are yielding over 6.5%. [iii] Our core money market account at SEI Private Trust is currently yield over 4.3% with daily liquidity.
Fear and Falling Economic Indicators
Institutional investors and Financial TV are continuing to sell fear. With continued signaling in the media to be afraid of current market conditions. Current leading economic indicators continue to show the economy is slowing down. With the LEI at the lowest level since November 2020.
Near Term Focus / Review
As long-term investors, we see current market and near-term weakness as an advantaged for long term investors to continue accumulating and investing. With equity premiums and valuations at levels that are more compelling than 2021 or 2022. We believe the market will continue to be a leading indicator and last years decline has priced in a fair amount of negative news already. Second, interest rates are at levels, we haven’t seen in 13+ years and inflation is coming down. As a result of this changing environment we believe it is wise for clients to review and update their 36-month cash strategy allocations.
Megaphones of Fear
If you have concerns about any part of your financial plan, including investments, cash position, banking, account titling and major career or life decisions; please reach out to update your plan get personalized advice specific to you. Today the high and loud sounds of mass generalized advice and fear are unprecedented. With the ability of media and marketing firms to deliver fear, ultra-personalized right in the palm of your hand, we want to remind you to be true to your plan. We are here to support you in your journey. As a client of Sterling Edge Financial we know where you are, where you want to go, and will help you adjust your plan specifically to serve you.
[i] https://www.treasurydirect.gov/
[ii] https://www.treasurydirect.gov/
[iii] https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/guide-to-the-markets/
https://www.conference-board.org/topics/us-leading-indicators