Treasury Inflation-Protected Securities

TIPS vs. I Bonds: Let’s do the math

Posted on September 20, 2026 by Tipswatch

TIPS are more attractive, but the I Bond’s fixed rate will be rising.

By David Enna, Tipswatch.com

While Treasury Inflation-Protected Securities and Series I Savings Bonds are both inflation-tracking investments, they each have a unique quality:

TIPS are reactive, with prices and real yields changing by the hour to reflect the current market value on the secondary market.
I Bonds are retroactive, with a real yield and interest rate locked in place for six months, based on market trends many months ago. There is no secondary market.

These qualities can work in favor of both investments. In past years, when the Federal Reserve was forcing real yields lower (and often negative), I Bonds had a huge advantage in real yield over TIPS, sometimes by as much as 150 basis points. But that is not the case today.

Market real yields have been soaring in 2026, pushing the 5-year real yield from 1.46% on January 1 to 2.55% at the close on Friday. Meanwhile, the I Bond’s fixed rate, which is equivalent to its real yield, has remained at 0.90% through the entire year.

I consider the 5-year TIPS and I Bond to be comparable investments. The I Bond can be redeemed without penalty after 5 years, matching the maturity of the TIPS. So when you see the 5-year TIPS real yield rise 109 basis points compared to zero for the I Bond, this is an easy conclusion: TIPS are the better investment.

It’s true, though, that I Bonds have several advantages over TIPS: tax-deferred interest, much better deflation protection, a flexible maturity, continual compounding of interest, and accumulated principal that can never go down in value. For that reason, I think a “fair value” fixed rate for the I Bond is equal to a ratio of 0.65 applied to the 5-year TIPS real yield.

Today, that ratio is only 0.35 (0.9/2.55 = 0.35). TIPS are a better value. This chart compares the 5-year real yield to the I Bond’s fixed rate since November 2023. Clearly, the ratio has moved way out of whack in recent months, as the I Bond’s fixed rate remains locked in at 0.9%.

Conclusion. TIPS have a large yield advantage over I Bonds, especially for purchases through October. On November 1, the I Bond’s fixed rate is highly likely to go up, and the new composite rate should be attractive. Let’s scope out that upcoming reset.

Fixed rate: At least 1.30%

All my forecasts for the I Bond’s fixed rate are based on this formula: Take the average 5-year real yield over the preceding 6 months and apply a ratio of 0.65. This formula has been an accurate predictor for more than a decade. But of course, the Treasury could decide to ditch it. Let’s assume they won’t. Here’s the history:

Fixed-rate projection. As of Friday’s market close, the 5-year real yield had averaged 1.951134 from May 1 to September 18. Applying the 0.65 ratio results in a new fixed rate of 1.30%, up from the current 0.90%.

There is nearly zero chance that the fixed rate will fall below 1.30%, if the Treasury follows its traditional rate-setting methods. There are only 29 market days remaining before the reset. As the chart shows, even if the 5-year real yield miraculously dropped to 2.0% for all 29 days, the fixed rate projection remains at 1.30%.

However, if the real yield continues at the current rate of 2.50% or higher, the rate will rise to 1.40%, which would be the highest fixed rate since a reset in November 2006. This is probably a long-shot but is certainly in play.

I think a new fixed rate of 1.30% looks like the most likely result.

Remember that the I Bond’s fixed rate is permanent and is usually the most important factor in an I Bond investment. The exception is for an investor looking for a short-term investment with a high composite rate.

Variable rate

Although just one month of inflation (for September) remains in the six-month rate-setting string, this is a difficult projection. Monthly inflation has been volatile this summer, but rising gas prices this month point to a boost. How much? I’d guess something close to 0.35% to 0.40% for the month.

An increase of 0.35% in non-seasonally adjusted inflation in September would give you a 6-month inflation number of 1.79%, which translates to a new variable rate of 3.58%, higher than the current 3.34%. That’s an estimate!

Composite rate

If the reset settles in at 1.30% fixed and 3.58% variable, the resulting composite rate would be 4.90%, much higher than the current 4.26%. That is attractive. Again, this is an estimate. Many readers have told me they were waiting for the November reset to buy their 2026 allocation — $10,000 per person per year. It looks like waiting will have paid off.

Even I Bonds with a 0.0% fixed rate would be getting a composite rate of 3.58% for six months. Not awful. (My Fidelity Treasury money market fund is paying 3.4%.)

Qualifications

Even if the fixed rate rises to 1.40%, the math will favor TIPS. Using the 0.65 ratio versus a 5-year TIPS at 2.55%, the I Bond gets a fair-value fixed rate of 1.70%. At least 1.40% is getting closer.

I would not be surprised, however, if we get a dip in real yields in coming months. The recent run-up has been dramatic. But yields could continue rising if inflation surges higher and the Federal Reserve triggers another rate hike in October or December.

Another qualification for I Bond purchases is TreasuryDirect’s transition to ID.me for login verification, which hard-launches Oct. 28. A lot of people have been troubled by the move, since ID.me is a private company. Does that reduce the attractiveness of I Bonds, which can only be purchased at TreasuryDirect?

My feeling is that a fixed rate of 1.30% or 1.40% will be attractive enough for a purchase in 2027. I can adapt to the ID.me login. The new fixed rate will be available for purchase through April 2027. I will return to this topic in mid-October, after the release of the September inflation report on October 14.

See: TreasuryDirect is launching a controversial login system

And: TreasuryDirect provides more guidance on ID.me transition

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

• Wise advice: ‘Don’t die with I Bonds’

• Let’s ‘try’ to clarify how an I Bond’s interest is calculated

• Inflation and I Bonds: Track the variable rate changes

• I Bonds: Here’s a simple way to track current value

• I Bond Manifesto: How this investment can work as an emergency fund

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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, I Bond, Inflation, Investing in TIPS, Savings Bond, TreasuryDirect | Tagged investing, personal-finance, Treasury investments | 14 Comments

10-year TIPS reopening gets real yield of 2.653%, highest in nearly 18 years

Posted on September 17, 2026 by Tipswatch

By David Enna, Tipswatch.com

The Treasury’s offering of $19 billion in a reopened Treasury Inflation-Protected Security, CUSIP 91282CRE3, generated a real yield to maturity of 2.653%, the highest for this term since an auction in October 2008.

Investor demand at the auction appeared to be a bit weak, in the wake of a Federal Reserve decision to raise interest rates on Wednesday, and signal that more increases could be coming. The auction’s bid-to-cover ratio was 2.24, the lowest for this term in a year. The “when-issued” prediction used by bond traders was 2.634%. The higher resulting yield indicates less-than-stellar demand.

For today’s auction investors, however, this adds up to good news. The real yield of 2.653% was 22 basis points higher than result for this TIPS’ originating auction on July 23, and a whopping 75 basis points higher than a similar 10-year reopening auction on March 19.

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 2.653% means an investment in this TIPS will provide a return that exceeds official U.S. inflation by 2.653% for 9 years, 10 months.

Here is the trend in 10-year real yields since January 2025:

In this chart, I have noted two crucial events: 1) The launch of U.S. tariffs in April 2025 and 2) the beginning of the U.S. war with Iran in March 2026. While tariffs caused real yields to immediately surge, the market returned to normal in a few months. The war with Iran, because of its inflationary dangers and resulting surge in government borrowing, has caused real yields to soar.

This is the path of annual all-items inflation over that same period, showing the apparent inflationary effects of tariffs and the obvious and more severe effects of the war and resulting energy crisis:

Real and nominal yields are rising for a reason. Inflation and government borrowing are not under control.

Pricing

The coupon rate for CUSIP 91282CRE3 was set at 2.375% by the originating auction in July. Because today’s real yield was higher, investors got a discounted unadjusted price of 97.612784. In addition, this TIPS will carry an inflation index of 0.99985 on the settlement date of September 30. With that information, we can calculate the cost of a $10,000 par-value investment at this auction:

Par value: $10,000.
Adjusted principal on settlement date: $10,000 x 0.99985 = $9,998.50.
Cost of investment: $9,998.50 x 0.97612784 = $9,759.81.
+ accrued interest of $49.69

In summary, the investor paid $9,759.81 for $9,998.50 of principal on the settlement date of September 30. From then on, the investor will earn accruals matching future U.S. inflation, plus an annual coupon rate of 2.375% for 9 years, 10 months. The accrued interest will be returned at the next coupon payment in January.

Inflation breakeven rate

At the auction’s close, the 10-year Treasury note was trading with nominal yield of 4.95%, giving this TIPS an inflation breakeven rate of 2.30%, in line with recent results for this term. It means the TIPS will out-perform the nominal Treasury if inflation averages more than 2.3% over the next 9 years, 10 months.

Over the last 10 years, ending in August, inflation has averaged 3.4%. Here is the trend in the 10-year inflation breakeven rate since January 2025:

Thoughts

Today’s auction was a very good result for investors, netting the highest real yield since a similar auction in October 2008 — in the heart of a severe financial crisis — went off at 2.85%. There is no evidence of a crisis today, except for the excessive surge in U.S. government and corporate borrowing.

This TIPS will get another reopening auction on November 19 and then a new 10-year TIPS will be auctioned January 21, 2027. That January auction is my current target, so I hope yields remain elevated until then.

Were you an investor? Post your thoughts in the comments section. Here is a history of auctions for this term 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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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, Tariffs | Tagged investing, personal-finance, Treasury investments | 30 Comments

Here’s an illustrated guide to TreasuryDirect’s new login process

Posted on September 14, 2026 by Tipswatch

By David Enna, Tipswatch.com

Based on reader feedback I’ve seen, it looks like most people are having no problems logging into TreasuryDirect‘s new system once they have completed verifying a login account with ID.me.

That’s good. The bigger problem, of course, is completing the ID.me verification process, which requires several steps. We are now in the “soft-launch” stage but an ID.me account will be required for access to TreasuryDirect beginning October 28.

This is a video created by the Social Security Administration to walk a user through the ID.me account-creation process. (I have no idea why TreasuryDirect has not created a similar video for its site):

The video details how a registrant using a computer would have to complete the process using a phone with a camera. The verification process is complex and can sometimes fail, especially when taking a “selfie photo.”

For more information, check ID.me’s guide to account setup.

The TreasuryDirect login

Once ID.me verification is properly completed, logging into TreasuryDirect is a simple process, as many readers have reported. TreasuryDirect did create a video for this part of the process. Here is the link (the video is not yet on YouTube).

My personal experience

As I have noted in past articles, my wife and each have a TreasuryDirect account. In the past, both accounts were linked to my email, so I could log into both and manage investments. My wife’s account is our “main account,” combining I Bonds (some redeemed this year) with a few T-bills and long-ago TIPS purchases. This is the account with the all-important tax documents. My account holds only I Bonds, and none have been redeemed in 2026.

My wife is currently traveling overseas. Before she left she attempted to set up an ID.me account, but I think that process was not completed. So set-up for that account will have to wait a few weeks.

Reminder: Under the ID.me process, one user will be able to manage a personal account and trust or entity accounts connected to that Social Security number and email address. But one user will not be able to manage two personal accounts with a single ID.me account.

I decided to go ahead and complete the login process for my account with ID.me, to get an idea of the experience. As readers have noted, it was simple, pretty much matching the TreasuryDirect video. Here’s a visual look:

Click login on the main page.

Click Secure Sign In to go to this intermediary page:

And then …

Enter the email address connected to your ID.me account.

And then the password.

Select the multi-factor authentication method. This step seems a bit odd to me, because a text message with “fair security” is offered as an option. But at least for me, using a desktop computer, the text message was the only option. The passkey option required — possibly — a fingerprint, which can’t be done on my computer.

I have used this process before for the IRS and have always used the text-message option. Just make sure to have your phone nearby.

Confirm the “text me” and check that the phone number digits match your device. I have hidden the numbers in this example.

Check your phone for the text message and enter it on this screen.

Authorize this information to be shared with TreasuryDirect. I believe that TD already has all this information, but the info is likely needed to confirm your login identity matches your account.

Confirm that TreasuryDirect can keep this information (which it already had) that was shared by the third-party provider (ID.me).

Select the account you want to access. In my case, the only option was my personal account. (My wife will need to log in separately for her account.) A person with both a personal and trust or entity accounts should see those options listed. You can log into one account at a time.

Conclusion

If you have a working ID.me account, linking it to your personal TreasuryDirect account is a simple process. That’s my experience. And I am going to give TreasuryDirect and ID.me credit for apparently working through most of the speed bumps, despite a very short launch path. (All logins will switch to ID.me on Oct. 28.)

But there many, many potential complexities. Please talk about your success and/or failures in the comments section.

Also see:

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Posted in I Bond, Savings Bond, Social Security, TreasuryDirect | Tagged ID.me, IRS, security | 41 Comments

This week’s 10-year TIPS auction has strong appeal

Posted on September 13, 2026 by Tipswatch

By David Enna, Tipswatch.com

The U.S. Treasury on Thursday will offer $19 billion in a reopened 10-year Treasury Inflation-Protected Security, CUSIP 91282CRE3. I’d expect demand to be strong, despite recent Treasury-market volatility. This TIPS looks attractive.

CUSIP 91282CRE3 had its originating auction on July 23, when it got a real yield to maturity of 2.438%, the highest at auction for this term since October 2008. The auction set its coupon rate at 2.375%.

This week’s auction looks likely to go even higher. CUSIP 91282CRE3 trades on the secondary market, and closed Friday with a real yield of 2.59%. If that yield holds through the auction, we are entering rare air. In the last 20 years, there have been 114 auctions of this term. These are the only ones with real yields exceeding 2.0%:

Note the time span in this chart, which includes only auctions before 2010 or after 2023. TIPS investors suffered through a 13-year period with much lower real yields, even as low as -1.145% as recently as five years ago. Of course, 10-year real yields could continue climbing higher, but getting anywhere near 2.5% is an investing opportunity, especially held to maturity.

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 2.59% means an investment in this TIPS would provide a return that exceeds official U.S. inflation by 2.59% for 9 years, 10 months.

Here is the trend in the 10-year real yield over the last 20 years, showing that today’s 10-year real yield has now surpassed the recent highs set in fall 2023:

Pricing

CUSIP 91282CRE3 is going to auction at below par value. That is pretty much guaranteed because the current real yield of 2.59% is well above the coupon rate of 2.375%, plus the inflation index on the settlement date of September 30 will be 0.99985. It is slightly less than par because of very slightly negative (-0.01%) non-seasonally-adjusted inflation in July 2026.

CUSIP 91282CRE3 closed Friday with a price of 98.13. Let’s estimate the cost for a par value investment of $10,000 at this auction, assuming the real yield holds at 2.59% (it won’t, but this is an estimate):

Par value: $10,000.
Adjusted principal on settlement date: $10,000 x 0.99985 = $9,998.50.
Cost of investment: $9,998.50 x 0.9813 = $9,811.53.
+ accrued interest of about $49.70.

Again, this is an estimate and market conditions will change by Thursday. In this example, the investor pays $9,811.53 for $9,998.50 in principal on the settlement date. From then on, the investor earns inflation accruals matching official inflation, plus an annual coupon of 2.375% paid on adjusted principal. The accrued interest will be returned at the first coupon payment in January.

Inflation breakeven rate

The 10-year Treasury note closed Friday with a nominal yield of 4.97%, which gives this TIPS a current inflation breakeven rate of 2.38%, in the range of recent auctions for this term. That number seems reasonable. Inflation over the last 10 years, ending in August, has averaged 3.4%.

We have to wonder, though, when that 10-year note’s nominal yield starts to look too tempting to ignore. At 5%, we are getting pretty close. But I would still prefer the TIPS for the added benefit of inflation protection.

Here is the trend in the 10-year inflation breakeven rate over the last 20 years:

Since late 2022, we have seen a remarkably stable pattern of 10-year inflation expectations, ranging from about 2.2% to 2.5%. As I always point out, inflation breakevens are just a measure of sentiment and are a lousy predictor of future inflation.

Thoughts

This will be an attractive auction. Keep in mind, though, that CUSIP 91282CRE3 trades on the secondary market and can be purchased at any time you see a real yield you like. The advantage of buying at auction is that even small-lot purchases will get the auction’s high yield. The advantage of the secondary market is that you can see exactly the price and real yield you will be receiving. The negative is that you may face a small bid-ask spread.

At this point, I am not bothering to recommend buying at TreasuryDirect, at least until we get through this ID.me verification mess. Remember that savings bonds are the only securities you can redeem at TreasuryDirect. Everything else needs to be transferred out to be sold, which can take months.

Thursday’s auction is likely to generate a real yield around 2.5%, which we haven’t seen at auction for this term since October 2008, in the heart of a major financial crisis. Real yields could continue rising, of course, but this is an attractive milestone for a hold-to-maturity investor.

This TIPS auction closes Thursday at 1 p.m. ET. Non-competitive bids at TreasuryDirect must be placed by noon Thursday. If you are putting an order in through a brokerage, make sure to place your order Wednesday or very early Thursday, because brokers cut off auction orders before the noon deadline.

I will be posting the auction results soon after the close on Thursday. Here is a history of auction results for this term over the last 5 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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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 | 32 Comments

U.S. inflation holds at 3.4% for August. Will that lead to a rate hike?

Posted on September 11, 2026 by Tipswatch

Plus, what’s ahead for investors in TIPS and I Bonds?

By David Enna, Tipswatch.com

U.S. all-items inflation rose 0.4% on a seasonally adjusted basis in August, up from 0.1% in July. The annual rate held at 3.4%, matching expectations, the BLS reported today.

Core inflation, which strips out food and energy, increased 0.3% for the month, higher than expectations. Annual core inflation came in at 2.4%, falling from 2.5% in July and matching expectations. None of this looks like market-shaking news, except that U.S. inflation remains too high, especially for U.S. consumers who drive cars, travel by plane, and need a place to live.

The price index for gasoline rose 3.9% in August, accounting for more than one third of the monthly all-items increase, the BLS said. Gas prices are up 27.4% over the last year. More troubling is the price of fuel oil, up 10.1% for the month and 52% for the year. Also in the report:

Shelter costs rose 0.3% in August, after rising only 0.1% in each of the prior two months. These costs are up 3% year over year.
Food at home prices were flat for the month and up 2.2% for the year.
Costs of apparel were flat for the month but up 3.6% for the year.
New vehicle costs rose 0.3% for the month, but only 0.6% for the year.
Used vehicle costs rose 0.4% in August but are down 2.3% for the year.
Airline fares rose 2.2% for the month and 23.4% for the year.
Costs of motor vehicle insurance fell 0.3% for the month and are down 5.1% for the year.
Costs of wireless telephone services jumped 5.9% in August. This seems to be an oddball rise that happens once or twice a year and may not effect that many customers, immediately.

Inflation analyst Michael Ashton noted the wireless increase (which is 1.47% of CPI) and said:

That basically adds up to the miss on core CPI. Do you think the Fed is going to hike rates because cell phone service prices jumped? That’s the bet you’re making if you think the high core CPI forces the Fed to hike.

A key takeaway is that energy and shelter were strong elements in the rise in August inflation. Food prices remain a moderating force. Here is the trend in all-items and core inflation over the last 12 months, showing the obvious effects of the war with Iran, which began in late February:

What this means for TIPS and I Bonds

Investors in Treasury Inflation-Protected Securities and Series I Savings Bonds are also interested in non-seasonally adjusted inflation, which is used to adjust principal balances of TIPS and set future interest rates for I Bonds. For August, the BLS set the CPI-U inflation index at 334.980, an increase of 0.32% over the July number.

For TIPS. The August number means that principal balances for all TIPS will increase 0.32% in October, after falling 0.01% in September. For the year ending in October, principal balances will have increased 3.4%. Here are the new October Inflation Indexes for all TIPS.

For I Bonds. August marks the fifth month of a six-month string that will determine the I Bond’s next inflation-adjusted variable rate, to be reset November 1 based on inflation from April to September 2026. After five months, inflation has increased 1.44%, which translates to a variable rate of 2.88%. One month remains and it looks likely the variable rate will end up around 3.4% to 3.5%, higher than the current 3.34%. Here are the data:

View historic data on my Inflation and I Bonds page.

Also, it continues to look likely that the I Bond’s fixed rate will rise to 1.30% at the November reset, up from the current 0.90%. I’ll be writing about that next month.

The Social Security COLA

The Social Security cost-of-living adjustment is based on an unusual inflation index – CPI-W – and is determined by averaging the indexes for July, August, and September and comparing that number to the same average for the year before. For August, the BLS set the CPI-W index at 328.481, up 0.4% from July.

The key is to compare the third-quarter averages — 2026 versus 2025, currently showing an increase of 3.3%. My projection was for an increase of 3.6%, which might have been too high. But we might still get there.

What this means for future interest rates

A week ago Federal Reserve Governor Christopher Waller moved markets by saying he was inclined to support holding interest rates steady at next week’s Fed meeting, but the decision would depend on the August inflation report.

So we’ve seen the report: What do we think? The numbers mostly matched expectations, except that monthly core was a tick high at 0.3%. Annual core fell a notch to 2.4%. Some of that price moderation could be caused by the effects of higher gas prices, which deplete other consumer spending.

This morning’s Bloomberg headline says: “Hotter Core CPI Adds Pressure for Fed to Hike Rates.” I think I prefer the Wall Street Journal headline: “Firm Inflation Reading Pushes Fed Closer to Rate Increase.” This wasn’t a blazing hot inflation report, but it did indicate that even core inflation, minus the effect of gas prices, isn’t waning. From Bloomberg:

Economists said the report adds to the case for the Fed to raise interest rates on Sept. 16. Initial calculations suggested that the proportion of categories showing elevated increases – a metric that Chairman Kevin Warsh has put a spotlight on – failed failed to retreat in the month. …

The Fed prefers the PCE inflation gauge. So Citigroup economists calculate that after today’s CPI and yesterday’s PPI, the core PCE for August is tracking a 0.29% month-on-month increase. That would be a three-month high for that rate. Too hot to be consistent with the Fed’s 2% inflation annual inflation target. …

Looking ahead, there’s more inflationary pressure in the pipeline. The average retail price of diesel fuel just topped $6 a gallon, according to this morning’s AAA report.

Inflation analyst Ashton had this to say:

Don’t get me wrong. This isn’t a beautiful inflation number. But if the FOMC is being honest, it shouldn’t move the needle.

The Fed is powerless to have much of an effect on energy prices, which have shot higher because of the effects of the war with Iran. But as a symbolic move, both to the markets and the White House, a 25-basis point increase seems appropriate next week. That would back up Fed Chairman Kevin Warsh’s recent hawkish statements.

Plus, if Warsh decides to favor holding rates steady, he could face major dissent on the Fed’s Open Market Committee. It would be better to look unified. I’d say a rate increase is coming.

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