30-Year TIPS Auctions With Real Yield Of 1.093%, To Strong Demand

Summary

  • The after-inflation yield of 1.093% was well below the real yield of 1.235% generated at an October auction of the same term.
  • Indirect buyers – meaning big money investors like foreign central banks – bought a record 82% of the $8 billion offering, indicating strong demand.
  • The inflation breakeven rate came in at 1.96%, below the number for recent auctions of this term.

This auction was greeted with apparent strong demand, with indirect bidders (primarily central banks, pension funds, and hedge funds) purchasing a record 82% of the $8 billion issue.

Read my full analysis on SeekingAlpha.com

 

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This Week’s New 30-Year TIPS Still Isn’t A Winner

Summary

  • 30-year real yields have been climbing, but remain below levels that would make them “interesting.”
  • The 30-year inflation breakeven rate is currently trending at 1.9%, an attractive number but one that reflects the reality of stubbornly low inflation.
  • Conclusion: This is a risky investment.

Read my full analysis on SeekingAlpha.com

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U.S. Inflation Was Unchanged In January, Dips To 1.6% For A Year

Summary

  • Gasoline prices fell 5.5% in January, continuing a downward force on headline inflation. Headline inflation has fallen from 2.9% in June 2018 to 1.6% in January.
  • Core inflation, which removes food and energy, rose a moderate 0.2% in January and is holding at 2.2% for 12 months.
  • Non-seasonally adjusted inflation rose 0.19% in January, which will increase March principal balances for holders of TIPS.

Investors in Treasury Inflation-Protected Securities and U.S. Series I Savings Bonds are also interested in non-seasonally adjusted inflation, which is used to adjust principal balances on TIPS and set future interest rates for I Bonds.┬áThe BLS set the January inflation index at 251.712, 0.19% higher than December’s number. Non-seasonally adjusted inflation has increased 1.6% over the last year.

Read my full analysis on SeekingAlpha.com

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Painful Truth: Inflation Protection Has Been A Losing Bet

Summary

  • Inflation over the last 10 years has averaged just 1.8% a year, much lower than investors were predicting in 2010.
  • Investing in Treasury Inflation-Protected Securities is a “bet” that inflation will run higher than expected, or at least match expectations.
  • TIPS have consistently underperformed nominal Treasurys in the last decade because inflation remained stubbornly low.

I’ve been writing about inflation-protected investments – Treasury Inflation-Protected Securities and U.S. Series I Savings Bonds – since 2011, and I’ve been investing in these products since 1999. So today I am going to take a look at how these investments have been doing. The answer is: Not so well.

Read my full analysis at SeekingAlpha.com

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Auction Of New 10-Year TIPS Generates Real Yield Of 0.919%

Summary

  • The real yield came in 19 basis points below a similar reopening auction in November 2018, just two months ago.
  • The inflation breakeven rate of 1.82% was the lowest for this term since an auction in September 2017, a positive for investors.
  • End result: No surprises, because the real yield came close to the Treasury’s real yield estimates of the last two days.

Read my full analysis on SeekingAlpha.com

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Sad To Say, This Week’s New 10-Year TIPS Might Be One To Skip

Summary

  • The trend is pointing toward a real yield to maturity of around 0.88%, down substantially from levels in November and December.
  • The inflation breakeven rate is currently at 1.83%, a favorable number that should boost demand for this new TIPS from big-money investors.
  • Think interest rates are heading lower? Then buy this TIPS. Otherwise, patience.

A few months ago, I had targeted this new 10-year TIPS as a purchase, in the hopes of a real yield and coupon rate of at least 1.00%. In “normal” times, a 10-year TIPS offers the sweet spot of a higher yield than shorter terms and a reasonable term to hold to maturity. It is the perfect term for building a ladder of bonds stretching 10 years into the future.

But ….

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U.S. Inflation Declines 0.1% In December, Dips To 1.9% For 2018

Summary

  • Bad news for holders of TIPS and I Bonds: Non-seasonally adjusted inflation fell 0.32% in December.
  • Falling energy prices again accounted for almost all the decline in overall inflation.
  • Core inflation remains moderate and steady at 2.2%.

The December inflation number is the third in a six-month string that will determine the I Bond’s new inflation-adjusted variable rate, which will be reset May 1. Three months in, we are looking at -0.48% inflation, which translates to a variable rate of -0.96%.

Read my full analysis on SeekingAlpha.com

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

And here are the new February inflation indexes for all TIPS.

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