{"id":44005,"date":"2023-08-03T11:47:00","date_gmt":"2023-08-03T15:47:00","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/i-bond-yields-have-tumbled-buy-these-bonds-instead\/"},"modified":"2023-08-03T11:47:02","modified_gmt":"2023-08-03T15:47:02","slug":"i-bond-yields-have-tumbled-buy-these-bonds-instead","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=44005","title":{"rendered":"I Bond Yields Have Tumbled: Buy These Bonds Instead"},"content":{"rendered":"<div>\n<p>You and I, my fellow contrarian, are old enough to remember when \u201cI bonds\u201d\u2014US savings bonds designed to protect you from inflation\u2014yielded 9.62%.<\/p>\n<p>It was May 2022. Just 14 months ago!<\/p>\n<p>Ah, the good ol\u2019 days. Since then, Series I savings bond rates have tumbled to 4.3%.<\/p>\n<p>Many readers wrote in with I bond questions earlier this year. The savings vehicles boasted a still sweet 6.89%. But they had two major limitations:<\/p>\n<ul>\n<li>I bonds tie up our money for a year.<\/li>\n<li>We can only invest $15,000 in them annually.<\/li>\n<\/ul>\n<p>(The annual limit is $10,000 per person, plus an extra $5,000 per year if using a federal tax refund. These position sizes and liquidity restrictions prevented I bonds from being a big play for us.)<\/p>\n<p>Having $15K tied up earning 9.62% or even 6.89% is one thing. A lousy <em>four-point-three percent<\/em> is another.<\/p>\n<p>Ah, the problem with \u201cshort duration\u201d vehicles like I bonds. It\u2019s great when rates are rising and our yields reset higher. But with inflation trending lower, this dividend party is done for now.<\/p>\n<p><fbs-ad position=\"inread\" progressive=\"\" ad-id=\"article-0-inread\" aria-hidden=\"true\" role=\"presentation\"><\/fbs-ad><\/p>\n<p>I bonds, our customer service team is going to miss questions about you. For forty years we heard nothing, then a clamor, and now, quiet again. I bonds, you were the Mayfly of the investing world. Gone but not forgotten.<\/p>\n<p>So, my I bond refugees, where are we stashing our up-to-$15K that is rolling off? Of course, we\u2019re not settling for 4.3% like vanilla investors!<\/p>\n<p><em>Heck<\/em> no. We\u2019re on to the next payer. This time, we\u2019re going to lock <em>in<\/em> <em>duration <\/em>(how long until a bond matures). Let\u2019s kick off our shoes and stay a while.<\/p>\n<p>What to buy? Simple. The Federal Reserve is keeping rates high, for as long as they can\u2014they told us so last week. What Chairman Jay Powell <em>didn\u2019t<\/em> say, at least explicitly, is that they are going to <em>hold <\/em>rates high until we hit a recession.<\/p>\n<p>Yeah, I know. He\u2019ll never admit he\u2019s gunning for the \u201cR\u201d word. But he is. Powell\u2019s perfect scenario is the \u201csoft landing\u201d that cools demand and finally takes inflation below his 2% target.<\/p>\n<p>As the economy eventually slows down, interest rates will drop. That\u2019s bullish for \u201cbond proxies\u201d like utility stocks. High flyers like tech and AI stocks will lose their luster. The investing playbook preached by our grandparents will be dusted off.<\/p>\n<p>Utility dividends. That\u2019s about as old school as it gets, and it\u2019s exactly what we want as this much-anticipated recession arrives!<\/p>\n<p>These stocks are likely to be the darlings of 2024. Which is why we are loading up on them <em>now<\/em>.<\/p>\n<p>Last week, we discussed <strong>Dominion Energy<br \/>\n  <fbs-ticker data-name=\"D\" data-href=\"https:\/\/www.forbes.com\/companies\/dominion-energy\" data-type=\"stock\"><br \/>\n   D<br \/>\n  <\/fbs-ticker> (D)<\/strong>, my favorite blue-chip utility stock. D yields 5% today. It rarely pays this much.<\/p>\n<p><em>I bond investors can not only get a pay raise with D, but they can \u201clock in\u201d a 5% yield for years to come. <\/em><\/p>\n<p>Want more yield from the utility sector? Consider closed-end funds (CEFs). While the mainstream media talks tech, we \u201csecond-level\u201d investors revel in <strong>Reaves Utility Income (UTG)<\/strong>.<\/p>\n<p>UTG focuses on traditional utilities like Duke Energy<fbs-ticker data-name=\"DUK\" data-href=\"https:\/\/www.forbes.com\/companies\/duke-energy\" data-type=\"stock\"><br \/>\n  DUK<br \/>\n <\/fbs-ticker> (DUK) and Southern Co (SO). (Surprisingly, no Dominion! Which is fine\u2014we\u2019ll help ourselves.)<\/p>\n<p>The fund frequently trades at <em>premiums<\/em> to its NAV, in recent years as high as 13%! But as I write, UTG trades at NAV, which is about as \u201ccheap\u201d as it ever gets.<\/p>\n<p>UTG pays a sweet <em>monthly<\/em> dividend, which adds up to an <em>elite 8.2% per year<\/em>. Plus the occasional payout <em>raise<\/em>, too.<\/p>\n<p><em>Source: <\/em><em data-ga-track=\"ExternalLink:http:\/\/incomecalendar.com\/\">Income Calendar<\/em><\/p>\n<p><em>Brett Owens is chief investment strategist for <\/em><em data-ga-track=\"ExternalLink:https:\/\/contrarianoutlook.com\/free-monthly-dividend-report-offers\/forbessig?source=MNTHLYFSIGCOREG=&amp;utm_source=forbes&amp;utm_medium=cpc&amp;utm_campaign=signature\">Contrarian Outlook<\/em><em>. For more great income ideas, get your free copy his latest special report: <\/em>Your Early Retirement Portfolio: Huge Dividends\u2014Every Month\u2014Forever.<\/p>\n<p><em>Disclosure: none<\/em><\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/brettowens\/2023\/08\/03\/i-bond-yields-have-tumbled-buy-these-bonds-instead\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>You and I, my fellow contrarian, are old enough to remember when \u201cI bonds\u201d\u2014US savings bonds designed to protect you from inflation\u2014yielded 9.62%. It was May 2022. Just 14 months ago! Ah, the good ol\u2019 days. Since then, Series I savings bond rates have tumbled to 4.3%. Many readers wrote in with I bond questions [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":44006,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-44005","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets","tag-featured"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>I Bond Yields Have Tumbled: Buy These Bonds Instead | iFintechWorld<\/title>\n<meta name=\"description\" content=\"You and I, my fellow contrarian, are old enough to remember when \u201cI bonds\u201d\u2014US savings bonds designed to protect you from inflation\u2014yielded 9.62%. 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