Treasury Inflation-Protected Securities

The I Bond’s new fixed rate should be 1.40%. However …

Posted on October 25, 2026 by Tipswatch

How exactly does Treasury do this calculation?

We are stumped. AI-generated image. Perchance.org

By David Enna, Tipswatch.com

It’s late October, and normally I would be writing a tome advising readers on investing in Series I Savings Bonds either before or after the November 1 rate reset.

Not this year. There is zero reason to invest in I Bonds under the current six-month terms: Fixed rate of 0.90%, inflation-adjusted variable rate of 3.34% and composite rate of 4.26%. All of those rates are going to increase with the November 1 reset (which should be announced Friday, Oct. 30).

Variable rate

We know the annualized variable rate is going to increase to 4.08%, based on 2.04% inflation from April to September. That’s locked in and it’s a big jump from the current 3.34%. All I Bonds, no matter when they were issued, will get the new variable rate, rolling in for six months depending on the original purchase month.

View historic data on my Inflation and I Bonds page.

The fixed rate

The Treasury has no announced formula for setting the I Bond’s fixed rate, and there is no legal requirement to follow any formula. This is up the discretion of Treasury officials, based on current real yield trends. TreasuryDirect provides this cryptic information:

The Secretary of the Treasury, or the Secretary’s designee, determines the fixed rate. The rate is based on market rates that have been adjusted to account for the value of components unique to savings bonds. These include the early redemption put option, tax deferral feature, deferred purchase feature, and Treasury’s administrative costs.

We do know, however, that for a decade this formula has accurately predicted the I Bond’s fixed-rate reset: Apply a ratio of 0.65 to the average 5-year real yield over the preceding six months.

But now — for the first time — we face the question: When does the six-month period begin and end? In my calculations, I have always started the count on the first day of the reset, May 1 and November 1. And I set the end date a day or two before the rate decision, and every time I had the correct forecast.

However, there is another theory used by Boglehead geniuses: Start the six-month period 5 market days before the previous reset and end it 5 days before the next reset. This also has produced the correct result for a decade.

This matters in October 2026 because for the first time, applying the two theoretical formulas results in a different forecast:

Things to keep in mind:

The Treasury rounds the fixed rate to the tenth decimal point, so now that the ratio for the May 1 start has reached 1.3529%, nothing that happens this week will change the 1.40% forecast, unless the 5-year real yield plummets 33 basis points.
The April 24 start-date forecast is also locked in, because the Treasury would be ignoring any further data.
The April 24 start results in a lower forecast because 5-year real yields at the end of April were much lower (about 1.35%) than they are now (about 2.34%).

So we have two different forecasts: 1.40% or 1.30%, and there is no way to know which one is correct. The Treasury’s decision, coming Friday, is going to tell us a lot, assuming it follows practices of the last decade.

I am going to stick with my traditional forecast method and say the fixed rate will be 1.40%. But … 1.30% is certainly possible. Or the Treasury could just abandon past practices and throw us all under the bus.

A fixed rate of 1.40% would be the highest for the I Bond since November 2006.

Composite rate

The composite rate isn’t simply the sum of the fixed rate and the variable rate, it is calculated with this formula:

Composite rate = fixed rate + (2 × semiannual inflation rate) + (fixed rate × semiannual inflation rate)

Here is how the math works for the 1.40% fixed rate:

Fixed rate: 0.0140
2 × 0.0204 = 0.0408
0.0140 × 0.0204 = 0.0002856

Add 0.0140 + 0.0408 + 0.0002856 and you get 0.0550856, which rounds to a composite rate of 5.51% annualized.

A six-month composite rate of 5.51% is very attractive at a time of T-bill yields of about 4.11%. Even with a couple Fed rate increases, the I Bond will be attractive.

If the fixed rate is 1.30%, the composite rate will be 5.41%, also very attractive.

An investing strategy?

TreasuryDirect has now posted this rather irrelevant notice on its homepage:

Rate Change Deadline: To receive the current 4.26% rate for I Bonds in TreasuryDirect, you must complete your purchase by 11:59 p.m. on Thursday, October 29. The bond would have an issue date of October 2026 and secure the current interest rate.

Obviously, do not invest in I Bonds this week in the days before the rate reset. Wait until November to get the higher fixed rate, higher variable rate, and higher composite rate. And if you are buying in November, wait until late in the month to make the purchase, since you will earn a full-month’s interest no matter which day you purchase. Maybe set a target of Nov. 25, to allow time to clear after Thanksgiving?

What if you purchased earlier in the year, as I did? You can call yourself “dumb,” but remember that just before the May reset, the 5-year real yield was still very tame in the range of 1.35% and the Fed looked likely to cut rates instead of raise them. No one could really predict the very strong surge in real and nominal yields.

I Bond purchases are limited to $10,000 per person per year unless you add to your holdings through gift-box, trusts, or business-owner strategies. The gift-box strategy still seems to be working, for people with a trusted partner.

Otherwise, wait until 2027. You will have until late April to purchase to get the full six-month benefit of the high composite rate and permanent fixed rate. That’s what I will do.

And a reminder: As of Oct. 28, to access TreasuryDirect you must have created a log-in account with ID.me, a private company that TreasuryDirect is using for verification. More on that here.

I Bonds vs. TIPS

These are two similar investments, both attractive, but in my mind they have different purposes.

I Bonds create a cash-equivalent, inflation-adjusted savings account that you can draw on at any time after 1 year with a small penalty or 5 years with no penalty. The value can never decline and all interest is compounded. That creates a useful pot of tax-deferred money to use when you need the cash.

Treasury Inflation-Protected Securities at the moment have much higher real yields and are perfect to buy and hold to maturity for specific spending needs in the future. TIPS are subject to constant changes in value. Current real yields make TIPS more attractive than I Bonds as a “pure investment.” But I Bonds have better compounding, better deflation protection, tax-deferred interest, and a flexible maturity date.

EE Savings Bonds

I don’t know of a formula for predicting the new fixed rate of EE Bonds, currently 2.40%. I expect this rate to rise, and for the Treasury to continue its policy of doubling the EE Bond’s original value if held for 20 years, creating an effective yield of 3.53%.

Qualifications

The projections presented in this article are based on 10 years of Treasury history in setting the I Bond’s fixed rate. But the Treasury could change course at any time. So far, in both of President Trump’s terms, the rate formula has remained accurate.

Keep in mind that the Treasury actually saves money by lending to I Bond investors at a real yield of 1.40% as opposed to the current 5-year real yield of 2.34% or 30-year real yield of 3.08%. Plus, savings bonds account for a minuscule portion of Treasury debt.

• 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, Treasury Bills, TreasuryDirect | 22 Comments

5-year TIPS auction gets real yield of 2.367% on a strong day for Treasurys

Posted on October 22, 2026 by Tipswatch

By David Enna, Tipswatch.com

The Treasury’s auction of a new 5-year Treasury Inflation-Protected Security, CUSIP 91282CRR4, generated a real yield to maturity of 2.367%, a disappointing result on a “risk-off” day that sent investors flooding into the safety of U.S. Treasurys.

Each October, the 5-year new issue is difficult to predict, but after yesterday’s close I would have guessed today’s real yield would have come in about 2.47%. A series of events overnight — a tech-stock rout, an escalation of tensions in the Mideast, and a debt-frenzy hitting Europe — resulted in investors swapping out of stocks and into Treasurys.

Both nominal and real yields have declined today. The yield of the 10-year Treasury note, for example, has fallen from about 5.13% yesterday to 4.96% today. That is significant, and today’s TIPS auction was caught in the wave.

Demand did not look surprisingly strong. The auction’s bid-to-cover ratio was 2.41, the lowest since a similar auction in April 2025. The “when-issued” yield prediction used by bond traders was 2.36%, and the auction result came in a bit higher.

The coupon rate for this TIPS was set at 2.25%.

It’s important to note, however, that the real yield of 2.367% was the highest at auction for this term in the last three years. And it was massively higher than the October auction of 2021. Investors should feel good about that.

Here is the trend in the 5-year real yield over the last year (ending Tuesday), showing the remarkable surge higher since May:

Pricing

CUSIP 91282CRR4 got an unadjusted price of 99.454587, at a discount because the coupon rate was set below the auction’s high yield. It will also carry an inflation index of 1.00154 on the settlement date of October 30. With that information we can calculate the cost of a $10,000 par value purchase at this auction.

Par value: $10,000.
Principal purchased on settlement date: $10,000 x 1.00154 = $10,015.40.
Cost of investment: $10,015.40 x 0.99454587 = $9,960.77.
+ accrued interest of $9.29.

In summary, an investor paid $9,960.77 for $10,015.40 of principal on the settlement date. From then on, the investor will earn accruals matching official U.S. inflation, plus annual coupon interest ot 2.25%, for the next five years. The accrued interest will be returned at the first coupon payment in April.

Inflation breakeven rate

At the auction’s close, the 5-year Treasury note was yielding 4.78%, giving this TIPS a 5-year inflation breakeven rate of 2.41%, a bit higher than recent trends for this term. The breakeven rate means the TIPS will out-perform a nominal Treasury if inflation averages more than 2.41% over the next five years. To me, this breakeven rate looks about right, but I’d prefer the inflation protection provided by the TIPS.

Here is the trend in the 5-year inflation breakeven rate over the last year, showing the decline in inflation expectations since mid-year:

Auction thoughts

Heading into this week, this auction looked very likely to set a 20-year high in real yield — possibly around 2.50% — but market turmoil broke that trend. The Treasury’s daily Yield Curve Estimate still showed 2.55% for a 5-year TIPS at yesterday’s close. (I thought the Treasury estimate was probably too high, as I explained in my preview article for this auction.)

So we end up with a real yield of 2.367%, a good result but not awe-inspiring. This TIPS will begin trading soon on the secondary market, and it will get a reopening auction on Tuesday, December 22. If we end up getting a rate increase from the Federal Reserve on December 9, that auction could get interesting.

Coming up. I will be posting a “forecast” for the I Bond’s new fixed and composite rates on Sunday, 8 a.m. ET. There is a lot of uncertainty for the fixed rate at the November 1 reset and this could go down to the wire.

Here are results for every 4- and 5-year TIPS auction over the last five 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, I Bond, Investing in TIPS, TreasuryDirect | Tagged economy, finance, inflation, investing, personal-finance, stocks, Treasury investments | 30 Comments

This week’s 5-year TIPS auction may be the ‘ultimate’ conservative investment

Posted on October 18, 2026 by Tipswatch

Auction update: 5-year TIPS auction gets real yield of 2.367% on a strong day for Treasurys

By David Enna, Tipswatch.com

The U.S. Treasury on Thursday will auction $26 billion in a new 5-year Treasury Inflation-Protected Security, CUSIP 91282CRR4. While the real yield and coupon rate will be determined by auction results, this TIPS looks highly attractive, for just about any conservative investor.

At Friday’s market close, the Treasury was estimating the real yield of a full-term 5-year TIPS at 2.52%, down from recent highs but up 88 basis points since June 1. If this TIPS gets a real yield above 2.44%, it will be the highest at auction for this term since the financial crisis of 2008.

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 2.52% means an investment in this TIPS would provide a return that exceeds official U.S. inflation by 2.52% for 5 years.

This is a near-zero risk investment (when held to maturity) with a term of only 5 years, the shortest the Treasury issues for TIPS. It will auction at a price very close to par value, and probably get an attractive coupon rate of 2.375% to 2.50%.

During the dreary and not-long-ago era of very low real yields, I was a fan of the 5-year TIPS for one reason: “The term is only five years.” Its value isn’t going to fluctuate wildly with changes in market real yields. Just hold it and forget it.

And don’t underestimate the value of tracking future inflation. See that 5-year TIPS issued in October 2021 at the bottom of the list, with a miserable real yield of -1.685%, the lowest for any TIPS in history? It matured last week. Because of surging inflation, it ended up generating a nominal return of 2.375%, well above the 1.20% offered on a 5-year Treasury note in October 2021. (I will post an article on this soon. Meanwhile, see my TIPS vs. Nominals page.)

Today, real yields are much higher. Getting an inflation-adjusted return of around 2.5% for five years is a safe, sensible investment choice for money you are putting aside for use in 5 years.

Here is the trend in the 5-year real yield over the last 20 years. With the exception of the very quick spike in 2008 (as all financial assets were being sold off), the current real yield is a two-decade high:

The October quandry

I’ve discussed this often but it is important to remember: The October auction of a new 5-year TIPS will almost always get a real yield to maturity that is lower than the “market” real yield you will see listed at your brokerage or in financial charts. That market number is based on the current trading yield of the most recent 5-year TIPS, CUSIP 91282CQP9, issued in April.

The April 5-year generally gets a higher real yield because it will be exposed to late-year non-seasonably adjusted deflation in its closing months, which happens almost every year. I wrote about this in October 2023: “There is an explanation for everything, right?“

The October 5-year auction is hard to predict, especially when real yields are volatile as they are today. Because that April TIPS closed Friday with a real yield of 2.439%, we could potentially see Thursday’s auction result come in below 2.52%, which is the Treasury’s current estimate. Be ready for anything, including volatility.

Pricing

Because this is a new TIPS, its coupon rate will be set to the 1/8th percentage point below the auctioned real yield, resulting in a slightly discounted unadjusted price. It will also carry an inflation index of 1.00154 on the settlement date of October 30, which will slightly raise the adjusted price. Overall, the auction should go off near par value. In other words, order $10,000 par value and the cost will be about $10,000.

Inflation breakeven rate

With the 5-year Treasury note trading with a nominal yield of 4.89%, this TIPS currently has a 5-year inflation breakeven rate of 2.37%, in line with recent trends. So it will outperform a nominal 5-year if inflation averages more than 2.37% over the next 5 years. (Nominal yields have also fallen a bit in recent days; the 5-year note topped at 5.09% on September 30.)

Here is the trend in the 5-year inflation breakeven rate over the last 20 years. Notice the amazing stability in inflation expectations since late 2022:

Thoughts

Market conditions can change by the Thursday auction, but this should be a very attractive issue. I emphasize that the term is only 5 years, so holding to maturity is not a chore, and even if you need to sell, volatility should be fairly low.

I won’t be a buyer because the 2031 rung of my TIPS ladder is complete. Otherwise, I would be jumping on this one. Why is it a strong conservative investment?

It has the full backing of the U.S. Treasury, which makes it near-zero credit risk.
The 5-year term makes it less volatile than other auctioned TIPS maturities.
The investor will be paying close to par value, which is guaranteed to be returned at maturity even if severe deflation sets in. (That’s unlikely, by the way.)
The investor will earn an annual coupon rate of, let’s say, 2.375% on inflation-adjusted principal through the entire 5 years.
The principal balance at maturity will be adjusted for official U.S. inflation. Even if you doubt those numbers, inflation is a serious risk for conservative investors.

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 Inflation, Investing in TIPS, TreasuryDirect | Tagged investing, personal-finance, Treasury investments | 42 Comments

September inflation sets I Bond variable rate at 4.08%; Social Security COLA will be 3.6%

Posted on October 14, 2026 by Tipswatch

I Bonds are likely to get another surge in popularity.

By David Enna, Tipswatch.com

U.S. inflation rose a bit higher than expectations in September, while also setting in stone the variable rate for the Series I Savings Bond and Social Security’s cost of living adjustment for benefits in 2027.

Let’s put off the inflation discussion for a moment and look at the I Bond rate and Social Security COLA

I Bond variable rate

For September, the Bureau of Labor Statistics set the non-seasonally adjusted CPI index at 336.940, an increase of 0.59% over the August index. The I Bond’s new inflation-adjusted variable rate, to be reset November 1, is based on inflation for the months of April to September 2026, which ran at 2.04%. That means the new variable rate will be 4.08%, up from the current rate of 3.34%.

This 4.08% rate will apply to all I Bonds purchased from November 2026 to April 2027, but will eventually roll into effect for all I Bonds no matter when they were purchased. This means that even I Bonds with a fixed rate of 0.0% will earn 4.08% annualized for six months.

I am also expecting the Treasury to raise the I Bond’s fixed rate, currently 0.90%, to at least 1.30% on November 1, and 1.40% is very much possible. (This assumes the Treasury follows past practices.) That would mean I Bonds purchased from November through April will get a composite rate of around 5.4%, or a little higher. That’s highly attractive. I Bonds are going to be a popular investment.

If you have already purchased your I Bond allocation for 2026 — $10,000 per person per year — you will be able to grab the new rate after January 1, when the calendar resets. You can also consider using the “gift-box” option, which I believe is still viable.

I will be writing an update on I Bond strategies next week.

For TIPS. The September inflation report means that principal balances for all TIPS will increase 0.59% in November, after rising 0.32% in October. Here are the new November Inflation Indexes for all TIPS. At the end of November, principal balances for TIPS will have increased 3.7% for the year.

Social Security COLA

The September inflation report was the third of three — for July to September — that determine the Social Security Administration’s cost-of-living adjustment for payments in 2027. The SSA uses a three-month average of a different index, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), to set its COLA.

For September, the BLS set CPI-W at 330.654, which produced a three-month average of 328.746, an increase of 3.6% over the same average for 2025. That means the Social Security COLA will be 3.6% for payments beginning in January. The numbers:

This is the second year in a row that the COLA has lagged overall CPI, which is running at 3.7%.

The average monthly Social Security retirement benefit for 2026 is approximately $2,071, based on SSA data. A 3.6% increase will boost that to $2,146, starting in January. However, we are likely to see off-setting increases in Medicare costs, to be announced in November.

As it turned out, the 3.6% COLA matched my prediction made on July 26: “Forecasting Social Security’s 2027 COLA: My guess is 3.6%.”

The inflation report

The BLS reported all-items inflation of 0.6% for September and 3.7% for the year, higher than the economists’ estimate of 3.6%. Core inflation came in at 0.3% for the month and 2.6% for the year, which is probably a bit jarring for the financial markets and Federal Reserve. Core inflation had been trending downward for three months.

Gasoline prices, of course, were a huge factor in all-items inflation. Gas prices rose 9.1% for the month, after rising 3.9% in August. Year-over-year, gas prices are up 34.2%. Even more shocking is the increase in fuel oil costs (which aligns with diesel costs), up 15.3% for the month and 74.2% for the year.

On the positive side, prices for food at home fell 0.1% in September and are up only 1.8% for the year. More from the report:

Shelter costs increased 0.4% for the month and 3.2% for the year.
Apparel prices rose 0.3% for the month and 3.4% for the year.
Costs of new vehicles increased 0.2% for the month and only 0.6% for the year.
Prices for used vehicles jumped 0.7% for the month but are down 1.5% for the year.
Airline fares increased 1.3% in September after rising 2.7% in August and are now up 22.4% for the year.
Motor vehicle insurance costs rose 0.1% for the month and are down 5.0% for the year.
Costs for computer equipment rose 1.4% for the month and 9.7% for the year.

Here is the trend for all-items and core inflation over the last 12 months, clearly showing the dramatic effect of the war/conflict with Iran, which began in March 2026 and continues today:

What this means for interest rates

September’s hotter-than-expected inflation report balances off recent reports showing weaker jobs numbers. Inflation appears to be the Federal Reserve’s number one priority, but raising interest rates will have little effect on the energy shock the U.S. and world are facing. From Bloomberg today:

“It’s clear as ever that inflation is stubborn and moving in the wrong direction,” according to Skyler Weinand at Regan Capital. “While we expect the Fed to pause on any rate changes in October, we expect rate hikes to resume in December.” …

The longer energy inflation stays elevated, the more likely it seeps into core inflation, so it’s a make-or-break moment for seeing whether the oil shock becomes a more systemic problem, noted Brian Jacobsen at Annex Wealth Management. Still, he says the Fed is likely to wait until December to hike again as a lot can happen between now and then.

This is from the Wall Street Journal:

Wall Street traders dialed up their bets that the Fed may indeed raise rates when officials meet in two weeks. Traders now see a roughly 50% chance of an October rate hike, up from 22% before the report was released.

I have been speculating that the Federal Reserve will hold off on increasing short-term rates at its October 27-28 meeting, less than a week before mid-term elections. In fact, if the Fed does raise rates on Oct. 28, it could indicate (to the markets) that the Fed is ‘panicking” over fear of inflation. Maybe it should panic, but holding off to December is probably a much easier path.

Unless the current energy shock is resolved, inflation is likely to remain elevated and more increases in short-term rates are coming.

• 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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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, I Bond, Inflation, Investing in TIPS, Retirement, Social Security | Tagged investing, personal-finance, Treasury investments | 69 Comments

‘TIPS are for losers’ … Really?

Posted on October 11, 2026 by Tipswatch

AI image (look at her right hand). Perchance.org

By David Enna, Tipswatch.com

Talk about a contrary opinion: Real yields for Treasury Inflation-Protected Securities have risen to their highest levels in nearly 20 years and still we can easily find negative opinions on this unique investment.

The latest opposing view is from Ed Al-Hussainy, fixed-income portfolio manager for Columbia Threadneedle Investments. He was quoted in a recent Unhedged newsletter posted by the Financial Times:

The quip is ‘TIPS are for losers’ and it’s very hard to find evidence to challenge that. Often investors come to the TIPS market thinking it will protect them from inflation — that’s the intuitive power of TIPS. What can often happen [is that] you can get punished even more in the TIPS market than the nominal Treasury market because it’s so small and the investor base for that market is so thin relative to nominal Treasuries.

The newsletter’s author, Hakyung Kim, raised the obvious counterpoint, “But can’t these risks be avoided by holding to maturity?” Then:

Al-Hussainy notes, “everyone thinks they’re going to hold Treasuries until maturity, whether it’s TIPS or nominals”. Nobody plans to need liquidity all of a sudden, but sometimes they do. TIPS are just about 7% of the total Treasury market. … The lack of liquidity in the TIPS market compared to Treasuries creates wide bid-ask spreads when volatility goes haywire, making them look more like corporate bonds than a safe-haven government security, notes Brij Khurana of Wellington Management.

Kim closes with this:

If you’re confident inflation is set to run hot for years and are certain you can hold until maturity, TIPS might be a good bet. Otherwise, just buy plain old Treasuries.

The big picture

Kim’s newsletter article was actually quite positive about TIPS, pointing out the high real yields offered across the yield curve:

5-year, real yield of 2.68%, up 104 basis points since June 1.
10-year, real yield of 2.91%, up 84 basis points.
20-year, real yield of 3.17%, up 69 basis points.
30-year, real yield of 3.32%, up 61 basis points.

She wrote:

If held to maturity, those are compelling yields, especially if you think inflation is set to rise further.

And there is the key point. The best way to invest in TIPS, and the only way I participate in this market, is to buy with a firm intention to hold to maturity. This is the strategy used by the large community of TIPS ladder-builders, creating a packaged investment that can deliver a predictable and safe inflation-adjusted dollar amount in the future (plus collect a coupon rate along the way.)

Invest $40,000 in a TIPS maturing in 2036, and at maturity you will get the inflation-adjusted equivalent of $40,000 at maturity. Plus an annual coupon payment of 2.375%, based on the most recent 10-year auction. The coupon pay-out will rise along with official U.S. inflation until maturity.

The latest update from Tipsladder.com says: “At current yields (as of 2026-10-09) a 30 year TIPS ladder can provide a Safe Withdrawal Rate of 5.1%, and a real yield of 3.2%.” This is highly attractive, and has been nearly impossible to attain for last 20 years. (Emphasis on safe.)

Kim then goes on to quote a highly positive Substack article written by respected economist Laurence Kotlikoff, with the title: “TIPS Are Screaming — Buy Me!” Kotlikoff writes:

The last half dozen years have witnessed a 30 percent inflation-generated effective default on nominal federal debt. Yet purchasers of nominal long-term Treasuries aren’t, it seems, worried about inflation long-term. …

To me, TIPS dominate nominal Treasuries. They have the same default risk, roughly the same tax treatment, and, given survey data, the same expected real return. But TIPS come with seemingly free insurance against a massive risk — another major bout of inflation. …

A strategy of buying and holding, through maturity, a portfolio of TIPS — building a TIPS ladder — appears the safest way to secure one’s retirement.

Aligned with this theme, Morningstar just posted an instructive article: “How to provide guaranteed retirement income while paying no commissions.” Among the points:

Unscrupulous financial planners want us to believe we can’t, by ourselves, secure our financial security for retirement – and therefore we need them to do it for us. That’s just not true, especially now, given the recent surge in TIPS yields.

The author, Mark Hulbert, provides a suggested way to build a TIPS ladder, and it makes sense to me:

The solution is to allocate only a portion of your retirement assets to a 30-year TIPS ladder and invest the remainder in a broad stock-market index fund that you don’t touch for 30 years. This approach extends the life of your guaranteed income to over 40 years.

TIPS haven’t been ‘losers’

I am not a fan of TIPS ETFs and mutual funds, but I can understand that for some investors this is the easiest solution to investing in TIPS. I do like the iShares iBond Target Date TIPS ETFs — which I wrote about here — because these ETFs have a specific maturity date and can be compared to TIPS held to maturity. The only complication is that for these ETFs, inflation accruals are paid out as current income and must be reinvested at a similar real yield.

But even traditional TIPS ETFs — rolling over a set series of maturities — have done “reasonably well” in recent years versus the total U.S. bond market. In this case, I want to highlight my favorite TIPS ETF: Vanguard’s Short-Term TIPS, ticker VTIP. This fund invests in TIPS maturing in less than five years, so the volatility is much lower than traditional broad-spectrum TIPS funds.

VTIP tends to track inflation better than the wider TIPS funds. It has less downside risk, and of course, less upside potential if real yields begin falling.

In all cases in these examples, the total U.S. bond market was the loser, falling a massive 13.1% in 2022, as inflation was rising 6.5%. VTIP was the best performer in this group, holding its loss to 2.96% in that year. Painful versus inflation, but not devastating. VTIP continues to out-perform in 2026.

In contrast, TIPS held to maturity gained 7.0% in inflation accruals in 2021, 6.5% in 2022 and 3.4% for the partial year of 2026. Yes, the market value of those TIPS declined, but remember this: At maturity, there is no such thing as “market value.” The investor gets:

Par value x inflation index + one final coupon payment.

For example, look at the 10-year TIPS that matured in July 2026. It was auctioned with a real yield to maturity of just 0.045%, and yet CUSIP 912828S50 outperformed a 10-year Treasury note purchased in July 2016 by a wide margin: An annual bonus of 1.86%. That is significant. The reason was unexpectedly high inflation over the ensuing 10 years. Read about this here.

Also: Check my ‘Tips Vs. Nominals’ page for historical data.

Conclusion

TIPS held to maturity will out-perform a similar-term nominal Treasury if inflation runs higher than expected. That expectation is currently around 2.35%, fairly high by historical standards but perfectly reasonable in 2026’s economic environment.

I am not against investing in nominal Treasurys — today’s yields cresting 5% are highly attractive. But I would tend to go nominal for five years or less, and use TIPS to do the heavy lifting of inflation protection.

Coming Wednesday …

The most important inflation report of the year, for September 2026, will be released at 8:30 am ET. This report will set in stone the I Bond’s new variable rate, to be reset on November 1, and also determine the Social Security COLA for benefits paid in 2027. I will be posting Wednesday morning, possibly in a breaking news format that will update over a couple hours. Visit often!

• 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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