10-Year TIPS Reopening Generates Attractive Real Yield Of 0.910%

Summary

  • The real yield of 0.910% was the second highest of this term through 43 auctions since May 2011.
  • The inflation breakeven rate came in at 2.15%, on the higher end of recent auctions, but still acceptably in the “neutral zone.”
  • Investors got an attractive yield, a good coupon rate of 0.750%, and a decent price versus nominal Treasurys.

Real my full analysis on SeekingAlpha.com

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Thursday’s 10-Year TIPS Reopening Looks Attractive, But …

Summary

  • The current trend indicates a real yield around 0.88%, which is attractive, at least based on auctions over the last seven years.
  • The problem? A 5-year TIPS is currently yielding 1 basis point higher than a 10-year. Why buy a longer-term with a lower yield?
  • The inflation breakeven rate is trending at 2.12%, still in the “neutral zone” and below current U.S. inflation of 2.7%.

Read my full analysis on SeekingAlpha.com

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August Inflation Rises 0.2%: What It Means For Social Security, TIPS, And I Bonds

Summary

  • August headline inflation came in below the consensus for the month and year. Core inflation was also below the consensus.
  • The current trend in CPI-W would place the 2019 Social Security cost-of-living increase in a range of 2.7% to 3.0%, with one month remaining for the calculation.
  • Non-seasonally adjusted inflation increased just 0.06% in August, after a 0.01% increase in July. What does this mean for TIPS and I Bonds?

Read my full analysis on SeekingAlpha.com

Also:

  1. I have updated my Tracking Inflation and I Bonds page with the new numbers.
  2. I have also updated my Social Security COLA page with an update on the 2018 calculation.
  3. And here are the updated October Inflation Indexes for all TIPS.

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5-Year TIPS Gets Real Yield Of 0.724%, Highest In Nearly 9 Years

Summary

  • Investors got this reopened TIPS at a discount, because the real yield was higher than the coupon rate of 0.625%.
  • The inflation breakeven rate came in at 1.99%, slipping 13 basis points since the originating auction in April. This is a positive for investors.
  • Reaction to the auction looks positive, with the TIP ETF getting a slight bump higher after the auction’s close.

Read my full analysis on SeekingAlpha.com

Here’s the nine-year trend in 5-year real yields:

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5-Year TIPS Reopening: Don’t Let Dip In Real Yields Scare You Away

Summary

  • Real yields for this term have dipped about 8 basis points since August 1. Not a great trend heading into an auction week.
  • But current after-inflation yields above 0.75% are attractive, and would be the highest yield at auction for this term in nearly 9 years.
  • The inflation breakeven rate has dipped below 2.0%, a positive trend for TIPS investors.

Read my full analysis on SeekingAlpha.com

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July Inflation Rises 0.2%: What This Means For TIPS, I Bonds And Social Security

Summary

  • 12-month core inflation rose to 2.4%, the highest number since September 2008.
  • Non-seasonally adjusted inflation was essentially flat, meaning minimal principal increases for TIPS and little change in the six-month total that will reset the I Bond’s variable rate.
  • CPI-W was also flat, marking the first month of the three-month period that will set Social Security’s COLA for 2019.

Read my full analysis on SeekingAlpha.com

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

Also updated: Social Security COLA calculations.

And here are new September Inflation Indexes for all TIPS.

Screen Shot 2018-08-10 at 7.45.57 AM

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Is The Flat Yield Curve Distorting The Value Of TIPS Mutual Funds?

Summary

  • Real yields are out of balance with historical norms. A 5-year TIPS is yielding only 13 basis points less than a 30-year TIPS.
  • Are we heading toward a recession? Would TIPS mutual funds benefit? Possibly, if the Federal Reserves steps in. Or, would a deflation scare set in?
  • The U.S. Treasury’s sharply increasing need to raise debt should force longer-term yields higher, sending TIPS funds lower.

One indicator I have watched for a long time is a price of $110 on the TIP ETF, which has marked a “buy signal” over the last seven years. Is that still valid?

Read my full analysis on SeekingAlpha.com

TIPS yields

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