5-Year TIPS Reopening: Don’t Let Dip In Real Yields Scare You Away

Summary

  • Real yields for this term have dipped about 8 basis points since August 1. Not a great trend heading into an auction week.
  • But current after-inflation yields above 0.75% are attractive, and would be the highest yield at auction for this term in nearly 9 years.
  • The inflation breakeven rate has dipped below 2.0%, a positive trend for TIPS investors.

Read my full analysis on SeekingAlpha.com

Advertisements
Posted in Investing in TIPS | Leave a comment

July Inflation Rises 0.2%: What This Means For TIPS, I Bonds And Social Security

Summary

  • 12-month core inflation rose to 2.4%, the highest number since September 2008.
  • Non-seasonally adjusted inflation was essentially flat, meaning minimal principal increases for TIPS and little change in the six-month total that will reset the I Bond’s variable rate.
  • CPI-W was also flat, marking the first month of the three-month period that will set Social Security’s COLA for 2019.

Read my full analysis on SeekingAlpha.com

Also, I have updated my I Bonds and Inflation page with these new numbers.

Also updated: Social Security COLA calculations.

And here are new September Inflation Indexes for all TIPS.

Screen Shot 2018-08-10 at 7.45.57 AM

Posted in Investing in TIPS | Leave a comment

Is The Flat Yield Curve Distorting The Value Of TIPS Mutual Funds?

Summary

  • Real yields are out of balance with historical norms. A 5-year TIPS is yielding only 13 basis points less than a 30-year TIPS.
  • Are we heading toward a recession? Would TIPS mutual funds benefit? Possibly, if the Federal Reserves steps in. Or, would a deflation scare set in?
  • The U.S. Treasury’s sharply increasing need to raise debt should force longer-term yields higher, sending TIPS funds lower.

One indicator I have watched for a long time is a price of $110 on the TIP ETF, which has marked a “buy signal” over the last seven years. Is that still valid?

Read my full analysis on SeekingAlpha.com

TIPS yields

Posted in Investing in TIPS | Leave a comment

Social Security COLA Looks Likely To Top 3% In 2019

Summary

  • The year-over-year increase in CPI-W was 3.1% in June, higher than overall ‘headline’ inflation measured by CPI-U.
  • Inflation measured by CPI-W in July, August and September will be averaged and compared to 2017 to determine the Social Security COLA increase for 2019.
  • Trends suggest a COLA increase of 3.1% to 3.2% looks likely.

Read my full analysis on SeekingAlpha.com

Here are the numbers I am using to make this projection:

Posted in Investing in TIPS | Leave a comment

Here’s Why Donald Trump Is Wrong About Interest Rates

Summary

  • Even after rising in recent months, short-term interest rates remain below the level suggested by an inflation rate of 2.9% and relatively strong economic growth.
  • A more reasonable Federal Funds Rate would be in the range of 3.25% to 3.50%, which is what the Federal Reserve is projecting for 2020.
  • Interest rates are not too high in July 2018. In fact, today’s level still punishes savers and people living on fixed incomes.

Read my full analysis on SeekingAlpha.com

Posted in Investing in TIPS | Leave a comment

New 10-Year TIPS Nabs 7-Year High Coupon Rate Of 0.75%

Summary

  • Today’s result broke a string of 42 consecutive TIPS auctions of the 9- to 10-year term with a coupon rate below 0.75%.
  • The actual real yield to maturity was 0.762%, slightly lower than expected, indicating good demand.
  • But the inflation breakeven rate dipped to 2.08%, below very recent trends and indicating less-than-strong demand.

Read my full analysis on SeekingAlpha.com

Posted in Investing in TIPS | Leave a comment

10-Year TIPS: This Week’s Auction Looks Attractive, Sort Of

Summary

  • CUSIP 912828Y38 is a new 10-year TIPS that currently projects to have a real yield of 0.72% and a coupon rate of 0.625%.
  • But a lot can change before the July 19 auction. Can the real yield rise above 0.75% and generate a coupon rate of 0.75%?
  • No TIPS auction has had a coupon rate of 0.75% since May 2011.

Read my full analysis on SeekingAlpha.com

Screen Shot 2018-07-14 at 8.49.35 PM

Posted in Investing in TIPS | Leave a comment