5-Year TIPS Auctions With A Real Yield Of 0.631%, Highest In Nearly 9 Years

  • The after-inflation yield was the highest for any 4- to 5-year TIPS auction since October 2009.
  • The coupon rate was set at 0.625%, the first time any TIPS of this term has had a coupon rate higher than 0.125% since April 2010.
  • The inflation breakeven rate came in a 2.13%, higher than in recent auctions but still in a ‘neutral’ range.

Read my full analysis on SeekingAlpha.com

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Thursday’s 5-Year TIPS Auction May Be The Most Attractive In Years

Summary

  • Current trends are pointing at a real yield above 0.65%, the highest for any 4- to 5-year TIPS auction since October 2009.
  • This TIPS will outperform a U.S. Series I Bond over five years and is very competitive with best-in-the-nation bank CDs.
  • The inflation breakeven rate should come in slightly higher than 2.0%, putting this TIPS in the “neutral” range versus on nominal Treasury.

Read my full analysis at SeekingAlpha.com

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I Bond Investors: Hold Off On Purchases Despite A Declining Variable Rate

Summary

  • The I Bond’s six-month variable rate will fall from 2.48% to 2.22% on May 1. The difference in yields is temporary and negligible.
  • The fixed rate will also be reset May 1, and odds are that it will hold at 0.1% — or rise to 0.2%, possibly even 0.3%.
  • The potential for a higher fixed rate means investors should delay purchases at least until after May 1, maybe even later.

Read my full analysis on SeekingAlpha.com

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I Bond’s Variable Rate Will Fall To 2.22% On May 1

Summary

  • Non-seasonally adjusted inflation from September 2017 to March 2018 rose 1.11%, which creates the new annualized rate.
  • Seasonally adjusted inflation in March actually dropped 0.1%, which was below expectations. Core inflation came in at 0.2%.
  • Both ‘headline’ and core inflation are at one-year highs.

The variable rate on U.S. Series I Savings Bonds will fall from 2.48% to 2.22% for I Bonds purchased after May 1, based on the March inflation numbers just released by the U.S. Bureau of Labor Statistics.

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10-Year TIPS Reopens With A Yield Of 0.764%, Highest In Nearly 7 Years

Summary

  • The after-inflation yield was 21 basis points higher than the originating auction in January.
  • Because this TIPS has a coupon rate of 0.5%, buyers got it at a discount: about $97.93 for $100.43 of value, after accrued inflation is added in.
  • The inflation breakeven rate was 2.07%, indicating this TIPS is fairly priced against a nominal Treasury of the same term.

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10-Year TIPS Will Reopen Thursday At A Nice Discount

Summary

  • CUSIP 9128283R9, with a coupon rate of 0.5%, probably will auction with an after-inflation yield near 0.75%.
  • That means buyers will get it at a discount to par value, about $97.50 per $100 before accrued inflation is added in.
  • The inflation breakeven rate is in the ‘neutral’ zone, meaning this TIPS is fairly priced versus a nominal 10-year Treasury.

I’d say this auction looks attractive. The inflation breakeven rate is reasonable and if the 10-year yield can hold above 0.75%, it would mark the highest yield since May 2011 for a 9- to 10-year TIPS at auction. That’s nearly seven years!

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U.S. Inflation Rose 0.2% In February, Matching Expectations

Summary

  • Gasoline prices fell 0.9%, which helped to moderate overall inflation. Food prices held steady.
  • Non-seasonally adjusted inflation rose 0.45% in the month, meaning TIPS principal balances will rise 0.45% in April.
  • The February number is the fifth in a six-month period that will determine the I Bond’s new variable rate, to be reset May 1.

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