Treasury Inflation-Protected Securities

TIPS vs. I Bonds: Right now, it’s ‘advantage TIPS’

Posted on June 29, 2026 by Tipswatch

By David Enna, Tipswatch.com

While on holiday in France, I got an email from reporter Susan Tompor asking about the current attractiveness of Series I Savings Bonds. Are these investments drawing more attention as inflation rises?

My immediate reaction was, “yes, definitely.” But I added, “For savvy investors seeking inflation protection, TIPS are the more attractive investment right now, because market real yields have moved much higher than the 0.90% fixed rate on I Bonds.”

Responding to Tompor, my advice on I Bonds was to hold off on 2026 purchases until at least mid-October, when we will know the new variable rate and get a good idea of the next fixed rate, due to be reset on November 1. This is from her article:

If inflation continues to sizzle, Enna told the Detroit Free Press, it’s possible that the fixed rate could move to 1% or even 1.2% for I Bonds issued from Nov. 1, 2026, through, April 30, 2027. …

Enna said he bought I Bonds earlier this year but others may want to wait to see if they can get a higher fixed rate when buying in November or December.

It’s true that I bought my 2026 I Bond allocation in April and so I will have to be happy with a 0.90% fixed rate (which is fine). When the new fixed rate is announced in November, I will be able to load up on it through April 2027.

• Confused by I Bonds? Read my Q&A on I Bonds

I Bond watchers believe the fixed rate is based, primarily, on this formula: Apply a 0.65 ratio to the 5-year TIPS real yield over the six months before the rate reset. At the last reset on May 1, the 5-year real yield was 1.33% and has now increased to 1.91%, a massive 58-basis point move higher in just two months.

The I Bond’s fixed rate lags market changes, which can work for or against an investor. Right now the lag is a negative. Here is the trend in the 5-, 10- and 30-year TIPS real yields since March, compared to the I Bond’s fixed rate of 0.90%:

Note that the 5-year real yield — the key indicator for a future I Bond fixed rate — has been moving higher faster than the longer-term yields, which were already elevated. This should continue if the Federal Reserve decides to raise short-term interest rates later this year. (The move higher is probably an indication of market expectations of higher rates. Of the auctioned TIPS issues, the 5-year maturity is the most sensitive to Fed rate decisions.)

At today’s real yields, I’d assign a “fair-value real yield” of 1.24% to the I Bond, based on the 0.65 ratio of the current 5-year real yield of 1.91%. Because the 5-year TIPS has a strong yield advantage, I would favor it as an investment. The 5-year TIPS and I Bond are directly comparable, since the I Bond can be redeemed after 5 years with no penalty.

That same logic applies across the board for TIPS, because the I Bond’s fixed rate is lagging recent interest-rate increases:

What’s the strategy?

For TIPS investors, I’d say right now is a good time to build out a multi-year ladder with real yields near or above 2.0% for most maturities. Yes, real yields can continue rising, but getting a real yield of 2%+ is a good target.

For I Bond investors, do nothing right now. The fixed rate will remain at 0.90% and composite rate at 4.26% for any investment through October. So there is no need to act now to lock in a 0.90% fixed rate when it seems likely the fixed rate will rise at the November reset. And the variable rate could also rise above the current 3.34%. That seems likely, but I can’t predict future inflation.

I have been saying the November 1 composite rate could be “dazzling,” but that will depend on how quickly the oil shock recedes and other inflation cools.

If you already purchased your 2026 allocation — $10,000 per person per year — the gift box strategy remains an option for people with a trusted partner, at least for the time being. Also, the November 1 rate reset will remain in effect through April 2027, so investors can pile in after January 1.

Reminder: I Bonds have many advantages over TIPS, and those justify the 0.65 yield ratio: Rock-solid deflation protection, tax-deferred interest, full compounding of interest, flexible maturity, and lack of any market-price fluctuations.

• Now is an ideal time to build a TIPS ladder

• Confused by TIPS? Read my Q&A on TIPS

• TIPS in depth: Understand the language

• TIPS on the secondary market: Things to consider

• TIPS investor: Don’t over-think the threat of deflation

• Upcoming schedule of TIPS auctions

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Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear. Please stay on topic and avoid political tirades. NOTE: Comment threads can only be three responses deep. If you see that you cannot respond, create a new comment and reference the topic.

David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.

Posted in Cash alternatives, Federal Reserve, I Bond, Inflation, Investing in TIPS, Savings Bond, TreasuryDirect | Tagged economy, finance, investing, personal-finance, stocks, Treasury investments | 18 Comments

5-year TIPS auction gets a real yield of 1.955%, a good result for investors

Posted on June 18, 2026 by Tipswatch

By David Enna, Tipswatch.com

The Treasury’s reopening auction of a 5-year Treasury Inflation-Protected Security — CUSIP 91282CQP9 — generated a real yield to maturity of 1.955%, a good result for investors.

Real and nominal Treasury yields moved higher late Wednesday after the Federal Reserve held short-term interest rates in a range of 3.50% to 3.75%. But dot-plot projections from Fed members made it clear that rate increases could be coming later in the year if U.S. inflation does not begin cooling.

I watched Kevin Warsh’s news conference and I’d say he tried valiantly to make things look calm at the Fed, but there is a lot of apparent dissent. Other than that, I can’t say I know much more, since I am on holiday in southern France.

Before the Fed meeting, the 5-year real yield had been hovering in an already-elevated range of 1.78% to 1.82%. So today’s auctioned real yield of 1.955% was a sharp move higher. Plus, the auction drew solid demand. The “when-issued” prediction was 1.96% and the bid-to-cover ratio was 2.61, also a good number.

The statistics indicate we are entering a period of higher real yields. Maybe short term? Maybe not?

Consider this: Two months ago, this same TIPS generated a real yield to maturity of 1.367% at its originating auction on April 23. Today’s result was 57 basis points higher. That’s a big move.

Here is the trend in the 5-year real yield over the last two years, showing that today’s move higher is still off highs of late 2023, early 2024, and early 2025:

Pricing

Because the real yield of 1.955% was well above the coupon rate of 1.25%, this TIPS auctioned at a strong discount, with an unadjusted price of 96.787926. It also will carry an inflation index of 1.02135 on the settlement date of June 30. Here is the resulting cost of a $10,000 par value investment at this auction:

Par value: $10,ooo.
Adjusted principal on settlement date: $10,000 x 1.02135 =$10,213.50.
Cost of investment: $10,213.50 x 0.96787926 = $9,885.43
+ accrued interest of $26.51.

In summary, an investor purchasing $10,000 par value at this auction paid $9,885.43 for $10,213.50 of principal on the June 30 settlement date. From then on, the investor will earn accruals matching official U.S. inflation, plus 1.25% annual interest on adjusted principal. The accrued interest will be returned at the next coupon payment on Oct. 15, 2026.

Inflation breakeven rate

The 5-year Treasury note was trading with a nominal yield of 4.20% at the auction’s close, giving this TIPS an inflation breakeven rate of 2.25%, which seems low to me under current economic conditions. The originating auction in April got an inflation-breakeven rate of 2.58%. Inflation over the last 5 years, ending in May, has averaged 4.5%.

This week’s peace announcement, along with the potential for lower energy prices, is probably a big factor in easing inflation expectations.

Here is the trend in the 5-year inflation breakeven rate over the last two years, showing the strong move higher after the outbreak of war in the Middle East and the more recent move lower.

Thoughts

I spent the entire day in Aix-en-Provence, one of my favorite places on Earth, and really didn’t follow Treasury trends closely. I am assuming the Fed’s mixed messages created fears of rising short-term interest rates, and the 5-year TIPS maturity is the most sensitive, at auction, to those trends.

If you invested in this auction, or have other feedback or ideas, please start the discussion in the comments section. Without going into political rants, what did you think of Kevin Warsh’s performance? What should the Fed be doing? I will try to watch! Meanwhile, here is a history of 4- to 5-year TIPS auctions over the last two years.

• Now is an ideal time to build a TIPS ladder

• Confused by TIPS? Read my Q&A on TIPS

• TIPS in depth: Understand the language

• TIPS on the secondary market: Things to consider

• TIPS investor: Don’t over-think the threat of deflation

• Upcoming schedule of TIPS auctions

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PayPal link / Venmo link

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Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Posted in Federal Reserve, Inflation, Investing in TIPS, TreasuryDirect | Tagged investing, personal-finance, Treasury investments | 40 Comments

My schedule … and what’s coming next

Posted on June 16, 2026 by Tipswatch

Marseille, France. Photo from Civitas.com

By David Enna, Tipswatch.com

By the time you are reading this, I will probably be sipping a dry rosé wine somewhere in southern France, where I will be traveling for two weeks. We will be starting in Marseille and eventually ending in Lyon.

I should have internet access through most of the trip and I’ll attempt (sort of) to keep up with financial news and reading & answering your comments. No promises. Expect delays. My article updates will be spotty and ill-timed.

This won’t be a particularly newsy two weeks, but of course crazy things do happen every few days in our current United States.

What’s ahead

All of France is following Central European Summer Time, which is six hours ahead of Eastern Daylight Time.

Wednesday, June 17. The Federal Reserve’s Open Market Committee will complete its first meeting under new Chairman Kevin Warsh. Any rate decision will be announced at 2 p.m. EDT (8 p.m. in southern France), and Warsh has committed to conduct a very interesting news conference a half hour later. The Fed is also expected to release a summary of economic projections.

I don’t write about Fed meetings, since you can get that content from 2,000 other sources. But if I can, I will watch the Warsh news conference out of pure curiosity. And it will be interesting to see if Jerome Powell, still a member of the Fed Board of Governors, pops up anywhere. (Prediction: He won’t.) These are questions I raised in my Sunday article:

Will the FOMC statement drop its “easing bias,” signaling the possibility of future rate increases?
Will Warsh suggest he is open to future rate increases, if needed?
Will the governors go along with Warsh’s plans to reduce the Fed’s balance sheet, which could cause long-term rates to rise?
What will the dot points predict for future interest rates, inflation and economic growth?
How much dissent will we see from voting members of the board?

Thursday, June 18. We will get the results of the reopening auction of a 5-year Treasury Inflation-Protected Security at 1 p.m. EDT, which translates to 7 p.m. CEST. We are traveling with friends, so my timing on this is uncertain. I will eventually post the auction results on Thursday.

That’s all I have marked on my calendar through my return on June 28. If you know of other upcoming events worthy of “vacation attention,” let me know in the comments.

The trip

We are not starting in Paris, so ignore that.

I adore France and the French (probably an unpopular opinion, I know) and have traveled through most of the country, north to south. Never been to Marseille. We will be using that city as a base to travel around the south until reaching Avignon, where we will board the Viking longship Buri for a week-long trek on the Rhône to Lyon.

Along the way we will see some new places: Viviers, Tournon, Vienne. But mostly this trip will be about enjoying time with our friends, combined with great wine and great food. And I will get to butcher my basic French along the way. (This results in the French switching to English, tout de suite!)

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PayPal link / Venmo link

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Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Posted in Federal Reserve, Inflation, Retirement, Travel | 18 Comments

5-year TIPS reopening auction arrives in a volatile week

Posted on June 14, 2026 by Tipswatch

By David Enna, Tipswatch.com

The U.S. Treasury on Thursday will auction $24 billion in a reopened 5-year Treasury Inflation-Protected Security, CUSIP 91282CQP9, creating a 4 year, 10-month TIPS.

The auction comes after months of surging real yields following the outbreak of war in the Mideast, surging energy costs and accelerating U.S. inflation. Since the war began on Feb. 28, the 5-year real yield has increased a remarkable 71 basis points.

At this point, however, the 5-year real yield is still well off its recent-history high of 2.59% set on Oct 3, 2023.

CUSIP 91282CQP9 had its originating auction April 23, when it got a real yield to maturity of 1.367%, well below the current market of 1.82%. Its coupon rate was set at 1.25%.

This TIPS trades on the secondary market, where it closed Friday with a real yield of 1.79% and a price of 97.51.

Definition: The “real yield to maturity” of a TIPS is its yield above future U.S. inflation, over the term of the TIPS. So a real yield of 1.79% means an investment in this TIPS would provide a return that exceeds official U.S. inflation by 1.79% for 4 years, 10 months.

Here is the trend in the 5-year real yield over the last 16 years, showing that the current yield remains in the high range for this maturity:

Volatile events

War and peace. As we entered this weekend, the U.S. and Iran appeared to be on the “cusp of peace,” a nice term the Wall Street Journal used in a Saturday headline. Or not. We all know how this goes — edge of peace to edge of war, within a day.

Any declaration of “peace” would likely set oil prices rolling back, a trend that is already underway, with the price of Brent crude falling from $112 on May 18 to $87 on Friday. But it could be long time before prices return to the pre-war level of about $69.

A true peace announcement could also send stock prices higher and provide relief for the Treasury market. Maybe.

The Federal Reserve. The Fed’s Open Market Committee will meet this week and at 2 p.m. ET Wednesday — 23 hours before the TIPS auction — we will hear that the federal funds rate is on hold. No surprise there, but because this will be the first meeting under the leadership of Chairman Kevin Warsh, markets will be watching closely.

Although Warsh has said he wants less public communication from the Fed, it is scheduled to release a “Summary of Economic Projections” and Warsh plans to hold a news conference after the meeting. So many questions:

Will the FOMC statement drop its “easing bias,” signaling the possibility of future rate increases?
Will Warsh suggest he is open to future rate increases, if needed?
Will the governors go along with Warsh’s plans to reduce the Fed’s balance sheet, which could cause long-term rates to rise?
What will the dot points predict for future interest rates, inflation and economic growth?
How much dissent will we see from voting members of the board?

Because all this Fed news will break one day before Thursday’s TIPS auction, you can expect to see some ripple-effects in the auction’s real yield. Be aware of that coming volatility if you plan an investment.