Treasury Inflation-Protected Securities

March inflation sets I Bond’s new variable rate at 3.34%

Posted on April 10, 2026 by Tipswatch

U.S. all-items inflation rose 0.9% in March to an annual rate of 3.3%.

By David Enna, Tipswatch.com

The March inflation report — a stunner, but not a surprise — showed that non-seasonally-adjusted all-items inflation rose 0.9% for the month, matching expectations after a massive surge higher in energy costs. The annual inflation rate rose to 3.3%, up from 2.4% in February.

This report is one of the most important of the year for investors in U.S. Series I Savings Bonds, because March inflation marks the end of a six-month string that will reset the I Bond’s variable rate on May 1. This is based on non-seasonally-adjusted inflation for the months of October 2025 to March 2026.

For March, the Bureau of Labor Statistics set the CPI Index at 330.213, an increase of 1.05% for the month. That resulted in an increase of 1.67% for the six-month rate-setting period, meaning the I Bond’s new inflation-adjusted variable rate will be 3.34%, up from the current 3.12%. Here are the data:

View historical data on my Inflation and I Bonds page

All I Bonds, no matter when they were issued, will eventually get the variable rate of 3.34% for six months, with the starting month depending on the original purchase month. The I Bond’s fixed rate will also be reset on May 1, but it looks likely to continue at 0.9%, meaning the new composite rate would be 4.26%, up from the current 4.03%.

An investor purchasing I Bonds in April will get a six-month annualized return of 4.03%, and then 4.26% for six months. But there is plenty of time to consider when to invest. Purchases through the end of April earn a full month of interest. I will be writing more on this “when to buy?” topic on Sunday.

What this means for TIPS

The Treasury uses non-seasonally-adjusted inflation in March to set daily inflation indexes for Treasury Inflation-Protected Securities in May. The March report means that principal balances for all TIPS will rise 1.05% in May, after rising 0.47% in February. Here are the new May Inflation Indexes for all TIPS.

The inflation report

Because of the extreme disruption to global energy markets in March, economists were expecting a dramatic surge higher in all-items inflation. The increase of 0.9% for the month met expectations.

Core inflation came in slightly below expectations for both the month and year, which could help soothe financial markets. But a jump in annual inflation from 2.4% in February to 3.3% in March is stunning. That is the highest annual inflation rate since April 2024.

And the trend could continue in April when missing housing data from October are added back into the CPI report. Because of the government shutdown, the BLS assumed zero increase in shelter costs in the month of October. That was highly unlikely. Here is the annual trend for all-items and core inflation, showing the remarkable gap in data:

In addition, in this March report the BLS said U.S. gasoline prices rose 21.2%, which indicates it did not capture the full month of price increases. The national average gas price started the month at about $3.15 and ended the month at about $4.16. That is an increase of 32% and prices have continued rising in April. This trend will continue.

Also in the March report:

Fuel oil prices rose a whopping 30.7% and are now up 44.2% for the year.
The overall energy index was up 10.9% in March, the highest increase since September 2005.
Food at home costs declined 0.2% and were up only 1.9% for the year. This trend could reverse as delivery costs begin to rise.
Shelter costs were up 0.3% and 3.0% for the year. We could see a bump higher in April as the missing October data are replaced by April survey numbers.
Apparel costs rose 1.0% in March after rising 1.3% in February.
Airline fares rose 2.7% for the month and are up 14.9% year over year.
New vehicle costs rose 0.1% for the month and are up only 0.5% for the year.
Prices of used cars and trucks fell 0.4% in March and were down 3.2% for the year.

The one bright spot in the March report is that food costs have moderated (egg prices were down 3.4%), but as I noted this progress could be stalled because of rising delivery costs caused by soaring gas prices.

What this means for interest rates

The current Federal Reserve isn’t going to budge interest rates higher or lower as the nation adapts to the inflationary shock of global gas prices. So I’d expect short-term interest rates to remain stable in the near term.

The core inflation numbers were slightly better than expected, which should help to soothe market jitters. But energy costs are a major concern. From Bloomberg’s report this morning:

The data underscore how the war in the Middle East is beginning to ripple through the US economy, worsening the affordability woes many households have faced in recent years. Americans are already experiencing higher prices at the pump, and service providers including Delta Air Lines Inc. and the US Postal Service have warned of price hikes ahead. …

“Looking ahead, we expect a similarly sized rise in headline CPI in April,” Kathy Bostjancic, the chief economist at Nationwide, said in a note after the release. “Even if a long-lasting deal to end the war is reached and the Strait of Hormuz is fully re-opened, it would take months for oil, gasoline, diesel and other commodity supplies to snap back to pre-war levels.”

The chaotic events of March reaffirm my long-standing commitment to allocating a portion of my investment portfolio to inflation protection, in the form of I Bonds and TIPS. These investments provide insurance. It’s best not to need the insurance, but comforting when you do need it.

If you are just learning about these investments, read these:

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

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

• TIPS in depth: Understand the language

—————————

Donate? This site is free and I plan to keep it that way. Some readers have suggested having a way to contribute. I would welcome donations. Any amount, or skip it, your choice. This is completely optional.

PayPal link / Venmo link

—————————

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, I Bond, Inflation, Investing in TIPS, TreasuryDirect | 9 Comments

A 5-year TIPS is maturing April 15. How did it do as an investment?

Posted on April 5, 2026 by Tipswatch

CUSIP 91282CCA7 had one of the ugliest TIPS auctions in history. And yet … it did well versus a nominal Treasury.

By David Enna, Tipswatch.com

Back in April 2021 I was out-of-my-mind frustrated by ultra-low real and nominal yields that offered little chance to surpass inflation. In those days, elite money market funds were yielding about 0.01% as the Federal Reserve held short-term interest rates near zero.

So I was intrigued (more out of boredom than financial sense) by the Treasury’s auction on April 22, 2021 of a new 5-year Treasury Inflation-Protected Security, CUSIP 91282CCA7. At the time, I was interested in “nibbling” into TIPS auctions after a long spell on the sidelines.

But I decided against a purchase. In my preview article for that auction I noted:

As of Friday’s market close, the Treasury was estimating the real yield to maturity of a 5-year TIPS at -1.73%, meaning an investor would be willing to receive a return that trails official U.S. inflation by 1.73% over the next five years.

Investors are going to pay a premium of about 9% above par for this TIPS, and then will receive coupon interest of 0.125% plus accruals to principal matching inflation over 5 years.

In closing, I noted that I Bonds were the superior investment:

You can purchase a U.S. Series I Savings Bond today and get a fixed rate of 0.0%, which means its real yield is 0.0% and your investment will very closely match future U.S. inflation for as long as you hold the I Bond. That is a 173-basis-point advantage over a 5-year TIPS.

At its originating auction, CUSIP 91282CCA7 got a real yield to maturity of -1.631%, which at the time was the lowest real yield at auction for any TIPS in history.

How did CUSIP 91282CCA7 do?

The February 2026 inflation report, issued March 11, closed the books on this TIPS. It will end with an inflation index of 1.24296 on the April 15 closing date. That reflects cumulative inflation of 24% over five years.

CUSIP 91282CCA7 ended up providing a nominal return of 2.715% over the next five years. At the time, a 5-year Treasury note had a nominal yield of just 0.82%, an incredibly low number. So the TIPS ended up outperforming the nominal Treasury by an annual rate of 1.89%.

Why did the TIPS outperform? When it was issued, it had an inflation breakeven rate of 2.45%, a very high number coming out of a decade of low inflation. But by April 2021 inflation had already started surging higher, with the annual rate rising from 1.2% in November 2020 to 4.2% in April 2021 — eventually reaching a high of 9.1% in June 2022.

In the five years after April 2021, inflation averaged 4.3%, well above the inflation breakeven rate of 2.45%. And that resulted in the TIPS outperforming the nominal Treasury. This result continues a six-year string of out-performance of TIPS over nominal Treasurys.

View historical data on my TIPS vs. Nominals page.

I Bonds were the winner

If you purchased an I Bond in April 2021, it had a fixed rate of 0.0%, much more attractive than the auctioned yield of -1.631% for this TIPS. By April 2026, the value of the I Bond had increased 24%, for an annual return of about 4.3% — easily exceeding the 2.7% for the TIPS or 0.8% for the nominal 5-year Treasury at the time. (Source: Eyebonds.info).

How about bond funds?

Vanguard’s Total Bond Fund (BND) has had a total annual return of 0.25% over the last five years, according to Morningstar. That poor performance was caused by the beating it took in 2022, when its annual return was -13.1%.

The iShares TIPS ETF (TIP), which holds the full range of maturities, has had a total annual return of 1.25% over the last five years, also under-performing CUSIP 91282CCA7.

Vanguard’s Short-Term TIPS ETF (VTIP) has had a total annual return of 3.46% over the last 5 years, better than CUSIP 91282CCA7’s performance. It benefits from a shorter duration and counter-acting gains from higher inflation.

There’s a lesson here

Two very important takeaways: 1) An I Bond with a fixed rate of 0.0% will be a very attractive investment any time the Federal Reserve decides to repress interest rates through quantitative easing. And 2) Even a TIPS with a negative real yield can be “relatively” attractive if the inflation breakeven rate is lower than seems likely.

Side note: I eventually did make a small purchase ($5,000 par) of CUSIP 91282CCA7 at the June 17, 2021 reopening auction when it got a real yield to maturity of -1.416%. The investment amount was $5,480 — a steep premium because of the negative yield.

This June 2021 version had a slightly better nominal return of 2.767%. The payout on April 15 will be $6,214.80, plus one final, very small coupon payment.

Notes and qualifications

My TIPS vs. Nominals chart is an estimate of performance.

Keep in mind that interest on a nominal Treasury and the TIPS coupon rate is paid out as current-year income and not reinvested. So in the case of a nominal Treasury, the interest earned could be reinvested elsewhere, which would potentially boost the gain. For certain, we don’t know what the investor could have earned precisely on an investment after re-investments.

In the case of a TIPS, the inflation adjustment compounds over time, and that will give TIPS a slight boost in return that isn’t reflected in the “average inflation” numbers presented in the chart.

• 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

—————————

PayPal link / Venmo link

—————————

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

Posted in Cash alternatives, Federal Reserve, I Bond, Investing in TIPS, Savings Bond | 14 Comments

I Bond’s fixed rate is likely to hold at 0.90% at May 1 reset

Posted on March 29, 2026 by Tipswatch

The Series I Savings Bond currently has a six-month composite rate of 4.03%.

By David Enna, Tipswatch.com

I realize that the fixed rate of the U.S. Series I Savings Bond isn’t top of mind for many investors at the moment, given an active war in the Mideast, soaring gas prices, and sharp declines in both the stock and bond markets. But in our little inflation-watching community, it’s a big deal.

Both the I Bond’s permanent fixed rate and inflation-adjusted variable rate will be reset May 1 for purchases from May to October 2026. Before the outbreak of war on Feb. 28 it appeared likely the I Bond’s fixed rate would fall from the current 0.90% to 0.80%. And it also seemed likely the composite rate would fall well below the current 4.03% because of a decline in the variable rate.

The fixed rate is important because it is permanent for the potential 30-year life of the I Bond. It represents the I Bond’s “real yield” above inflation. March’s surge in both prices and interest rates has changed the likely result of the May 1 reset.

(For more on the basics of I Bonds and potential buying strategies, read my Jan. 25 article: “I Bond buying guide for 2026: Wait it out.”)

Although the U.S. Treasury does not reveal its formula for determining the I Bond’s fixed rate, we know Treasury tracks trends in real yields and adjusts accordingly. This forecasting formula has worked for the last decade: Take the average real yield of the 5-year TIPS over the preceding six months and apply a ratio of 0.65.

The next rate reset will come May 1, so we are interested in real yields from November 2025 to April 2026.

Real yields surged higher in March. Click on image for larger version

The before. On Feb. 27, one day before hostilities broke out, the 5-year real yield had fallen to 1.11% and looked likely to continue in a range below 1.20%, which would have dropped the I Bond’s fixed rate to 0.80% at the May 1 reset.

The after. At Friday’s close, the Treasury was estimating the 5-year real yield at 1.50%, up 39 basis points for the month, so far. The current trend — it appears — would have the 5-year real yield solidly above 1.30% in April.

Let’s look at how the equation has changed.

In this chart, the projection is calculated using a 0.65 ratio of the average daily 5-year real yield from November 1, 2025, to March 27, 2026. Using that data, the real yield average is 1.33% and results in an I Bond projection of 0.90%.

1.331515152 x 0.65 = 0.8655%. The I Bond’s fixed rate is always rounded to the tenth decimal point, so the current projection is 0.90%.

That projection holds even if the 5-year real yield drops to the 1.30% range for the 23 remaining market days until the May 1 reset. It would take a fall to an average of 1.20% for those 23 days to cause the projection to fall to 0.80%. That kind of fall is unlikely, even if the Iran hostilities are resolved quickly.

It is even more unlikely that the I Bond’s fixed rate will rise above the current 0.90%, which would require a massive move higher in real yields to balance off five months of accumulated data.

Conclusion. It looks highly likely that the I Bond’s fixed rate will hold at 0.90%.

Qualifications

This projection is based on 10 years of Treasury history in setting the I Bond’s fixed rate. But the Treasury could change course at any time and we should be aware of that. President Trump’s first-term Treasury followed the formula and has continued to do so in his second term.

What about the variable rate?

The March inflation report will be issued April 10 at 8:30 a.m. and we will get the final piece needed to know the I Bond’s inflation-adjusted variable rate, which will roll into effect for all I Bonds ever issued, depending on the original month of purchase.

Here are the data so far:

At the end of February — if we assumed moderate inflation in March — we were looking at a potential variable rate of about 2%, well below the current 3.12%.

But soaring gas prices in March — up nearly 40% for the month — are likely to trigger a dramatically higher non-seasonally adjusted inflation rate for that month. The Cleveland Fed’s Nowcasting page is projecting a rate of 0.76% for all-items inflation in March. That is a seasonally adjusted number, so the actual non-seasonally adjusted number for March could be 1.0% or higher.

Conclusion. If we get 1.0% non-seasonally adjusted inflation in March, the variable rate would soar to 3.22% and we would be looking at a composite rate of about 4.2% for six months for purchases from May to October 2026.

Is there a strategy?

Yes. The strategy remains the same as I wrote in January: “Wait it out.” We will get the March inflation number on April 10 and then we will have more than two weeks to contemplate purchasing I Bonds in April, in May, later in the year, or not at all.

If the I Bond’s fixed rate looks likely to hold at 0.9%, and the composite rate will be competitive with the current 4.03%, there will be less incentive to buy I Bonds in April. And in fact, the logical path might be to see how rates develop before the November 1 reset.

An I Bond earns the then-current composite rate for six full months before transitioning to a new variable rate. So a purchase late in May would be financially equivalent to a purchase late in October.

Although real yields are climbing (and could remain elevated) I Bonds remain an attractive inflation-adjusted investment, earning tax-deferred interest, exempt from state income taxes, and with rock-solid deflation protection.

April is going to be an interesting month. I will have more to say on this topic after we see that March inflation report.

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

—————————

PayPal link / Venmo link

—————————

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

Posted in Cash alternatives, I Bond, Inflation, Retirement, Savings Bond, TreasuryDirect | 39 Comments

War in Iran: Sliding toward a financial crisis

Posted on March 23, 2026 by Tipswatch

AI-generated image for “investor watching lit bomb.” Perchance.org

U.S. stock and bond markets are ‘resilient,’ but how long can that last?

By David Enna, Tipswatch.com

Feeling a bit of financial panic? Can’t blame you. But let’s take a closer look.

The U.S. stock market had started a slight decline before the U.S. began bombing Iran on February 28. Since then, the Standard & Poors 500 index has suffered four straight weeks of declines, its longest losing streak since 2023, according to Barron’s.

The Nasdaq Composite has fallen in nine of the past 10 weeks, something it hasn’t done since 2022. The U.S. bond market has also been hit, with long-term yields rising to highs for the year on Friday. The 20- and 30-year Treasury bonds could break through the 5% barrier at any time.

With the price of oil topping $100 a barrel — and staying there — gasoline prices in the United States have increased to a national average of $3.94, up 34% in one month. Diesel fuel now retails at $5.25 a gallon, up 41% in one month.

These fuel prices — and the inevitable pass-through costs for delivery services, electricity, home heating, fertilizer, transportation, etc. — are going to boost U.S. inflation, possibly dramatically. If this crisis continues, the situation will be dire for the U.S. economy.

But not yet. The overall U.S. stock market has not entered a bear market (meaning a decline of 20% from the previous high) or even a correction (10% from the high). The S&P 500 is currently 6.2% below its all-time high of 6,932, reached on Dec. 24, 2025.

In this chart, note that the best performer over the last month has been Bitcoin, but ignore that. It was down 16.89% over the last year and is a highly speculative investment. Same for the gold ETF, GLD, the worst performer over the last month but up 47.24% over the last year. I don’t focus on Bitcoin or gold, but I included them here for comparison.

The more mainstream investments — the S&P 500, total stock market, total bond market, Nasdaq QQQ, S&P 500 equal weight — are all down substantially, but not enough to mark a correction, let alone a bear market. However, the total international stock market, represented by VXUS, has now entered correction territory, down 10.4% from its 52-week high.

Those of you old enough to remember a true bear market (not like the 33-day event in 2020) know that eventually fear and panic set in, causing sharp across-the-board selling. The saying goes, “Stairs up, elevator down.” The average bear market lasts 9 to 18 months. We aren’t there yet.

TIPS? Not so bad. Note that Vanguard’s short-term TIPS ETF, VTIP, has been the best performer of the mainstream holdings, eking out a meager total return of 0.36% for the month. The broader-based TIPS ETF, TIP, is down just 0.87% over the month.

If you are holding individual TIPS to maturity, the current market chaos is meaningless as long as you view the value of your holdings as par value x inflation index. As inflation rises, these holdings will increase in value. Plus, rising yields for longer-term TIPS present buying opportunities for investors still building out ladders.

Near future looks dim

There doesn’t seem to be a quick solution to the fighting in Iran, which has been steadily escalating. President Trump was threatening to strike Iran’s power plants and critical infrastructure today unless the Strait of Hormuz was opened. (FYI, I was writing this Sunday afternoon.) Iran responded that it would “completely close” the strait if its infrastructure is attacked. From the New York Times:

Ebrahim Zolfaghari, an Iranian military spokesman, vowed that his country would strike infrastructure used by Israel, the United States and American allies — including desalination plants that are a lifeline for much of the Middle East. …

Israeli officials have told the public to expect a protracted campaign.

Monday morning update

In a Truth Social post, Trump said the United States will postpone further strikes on Iranian power plants and energy infrastructure for five days following “productive” talks between Washington and Tehran. In reaction, at 7:30 a.m. the S&P 500 futures were up 2.1%. Oil prices immediately dropped by about 13%.

Iran did not immediately comment on Trump’s statement. The original Truth Social post was later pulled down (possibly because it contained a typo in the third word?) Most news organizations continued to report this update. So here we go. A moment of good news, but very confusing news. About 45 minutes later, Trump reposted the message with the typo corrected:

From the New York Times:

President Trump did not elaborate on the details of how Iran and the United States might agree to “a complete and total resolution” of their hostilities. Analysts have said it was difficult to identify a possible offramp for the conflict.

And then, within the hour, Iran news media reported that there were no current talks between the U.S. and Iran. (However, talks may be ongoing with 3rd-party Gulf states). From Bloomberg:

Iran’s semi-official Tasnim news agency is now also reporting Iran is not in talks, and there have been no talks, with Trump. It cites an unnamed senior security official. Trump’s social media statement is “psychological warfare,” Tasnim says.

A prolonged battle with Iran is going to mean 1) higher oil and gas prices extending well into the future, 2) an extended period of higher inflation in the United States, and 3) a massive increase in U.S. military spending at a time of ultra-high federal deficits. Add to that: 4) a highly unhappy voting populace in the fall mid-term elections.

Under these circumstances, the financial markets would have to abandon resiliency. We definitely could see a bear stock market, falling bond market and a true slowdown in the U.S. economy. Prediction: If we get to a situation this dire, the president will have to accept a cease-fire deal — one that keeps the current Iranian regime in power and retaining some influence over events in the Mideast.

Of course, I am not a geopolitical strategist, and this is just my opinion. I hope I am wrong.

Is there a strategy for investors?

My wife and I have a conservative asset allocation in stocks — 35% — and if we actually entered a bear market, we would probably look to add to stock holdings in funds like VTI and VXUS. But I have to admit feeling uneasy about the safety of all U.S. investments in this unpredictable long-term environment.

Your opinion is as good as mine. What are you thinking and are you making any changes in your investments in reaction?

—————————

PayPal link / Venmo link

—————————

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 | Tagged economy, finance, investing, personal-finance, stocks, Treasury investments, U.S. bond market | 55 Comments

10-year TIPS reopening gets real yield of 1.896%

Posted on March 19, 2026 by Tipswatch

Investor demand might have been a bit weak.

By David Enna, Tipswatch.com

The Treasury’s offering of $19 billion in a reopened 10-year TIPS – CUSIP 91282CPU9 – generated a real yield to maturity of 1.896%, a bit higher than the market was expecting.

The reopening auction created a 9-year, 10-month TIPS. The coupon rate of 1.875% was set by the originating auction on Jan. 22, 2026.

This TIPS trades on the secondary market, and through the morning its real yield was inching higher, from about 1.85% around 8 a.m. to 1.88% right before the auction’s close. The “when-issued” yield prediction used by bond traders was 1.88%, so the resulting yield of 1.896% indicates relatively weak demand. The bid-to-cover ratio, however, was strong at 2.47, the highest for the last six auctions of this term.

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 1.896% means an investment in this TIPS would provide a return that exceeds official U.S. inflation by 1.896% for 9 years, 10 months.

It’s been a volatile week for Treasury issues in a market roiled by potential price shocks from a war in the Mideast, and then contradictory messaging by Federal Reserve Chairman Jerome Powell on Wednesday. So overall, this auction result looks pretty solid.

Here is the trend in the 10-year real yield over the last two years, with this auction’s yield falling just below the mid-range of yields:

Pricing

Because the auctioned real yield was slightly above the coupon rate, investors got this TIPS at a discounted unadjusted price of 99.810964. In addition, it will carry an inflation index of 1.00086 on the settlement date of March 31. With that information, we can calculate the exact cost of a $10,000 par investment at this auction:

Par value: $10,000.
Adjusted principal on settlement date: $10,000 x 1.00086 = $10,008.60.
Cost of investment. $10,008.60 x 0.99810964 = $9,989.68.
+ accrued interest of $38.88.

In summary, an investor purchasing $10,000 in par value will pay $9,989.68 for $10,008.60 of principal on the settlement date of March 31. From then on, the investor will earn accruals matching future inflation plus collect an annual coupon rate of 1.875% on adjusted principal. The $38.88 in accrued interest will be returned at the first coupon payment on July 15.

Inflation breakeven rate

At the auction’s close, the 10-year Treasury note was trading with a nominal yield of 4.28%, giving this TIPS an inflation breakeven rate of 2.38%, a bit high but in line with many recent auction results. This means the TIPS will outperform the nominal Treasury if inflation averages more than 2.38% over the next 9 years, 10 months. Inflation has averaged 3.3% over the last 10 years, ending in February.

Here is the trend in the 10-year inflation breakeven rate over the last two years, showing that this auction ended in the trend’s higher range:

Thoughts

This looks like a solid result for investors. The yield of 1.896% was below January’s originating auction at 1.940%, but still attractive when compared to auctions over the last 15 years. For investors, the Treasury market is highly uncertain. The White House appears to be asking Congress for an additional $200 billion to support the war with Iran (and potentially to restock dwindling weapon supplies.) This would add to the Treasury’s heavy load of borrowing and potentially drive medium- and longer-term interest rates higher.

Inflation definitely is a concern for the near term and possibly longer. And then what will be the effect of an oil-price-shock on the U.S. economy? In his press conference Wednesday, Powell used the term “don’t know” 17 times (Forbes did the counting), including this quote on the current oil crunch:

The economic effects could be bigger, they could be smaller, they could be much smaller or much bigger. We just don’t know.

The Fed doesn’t know, and neither do we. And for that reason, investors should set aside some allocation to protect against inflation.

CUSIP 91282CPU9 will get one more reopening auction on May 21 and then a new 10-year TIPS will be auctioned on July 23. Here is the history of auctions for this term over the last four years: