Treasury Inflation-Protected Securities

Inflation moves higher in October, but the annual numbers are missing

Posted on November 10, 2026 by Tipswatch

By David Enna, Tipswatch.com

Last year’s government shutdown in October 2025 came back to haunt us in October 2026. Because of the lack of year-ago data, the Bureau of Labor Statistics was not able to provide an annual rate of inflation. Instead, it provided only monthly numbers for October, which came in higher than expected. The BLS said:

BLS did not collect survey data for October 2025 because of a lapse in appropriations. For most CPI series, BLS could not publish October 2025 indexes. As a result, BLS cannot publish 12-month percent changes for October 2026 for indexes where October 2025 data are unavailable.

What a mess. While the shutdown nightmare is now a year past, we could continue to see jumbled inflation data in November, at least, because November 2025 data were highly suspect. And then, could we get another shutdown soon over contentious issues? All I can say is: “Don’t do it.”

October inflation

The BLS said seasonally adjusted all-items CPI-U increased 0.4% for the month. Core inflation rose 0.3%. Both of these numbers exceeded expectations.

I’d say this is bad news for the stock and bond markets, but I have been on a bus all day in southern Spain (the reason this coverage is late). We don’t know the annual rate of all-items inflation, but the BLS had to create an inflation index for October 2026, which will be used to adjust principal balances on Treasury Inflation-Protected Securities and set future interest rates for Series I Savings Bonds.

The BLS set the non-seasonally-adjusted October CPI index at 337.511, an increase of 0.17% over the September number. This creates an annual inflation rate of 3.7%, the same as the September number. I am willing to accept that annual inflation is running at 3.7%.

Here are the data for non-seasonally adjusted CPI-U, with a bunch of qualifications:

For TIPS. The October inflation number means that TIPS inflation-adjusted principal balances will increase 0.17% in December, after rising 0.59% in November. Here are the new December inflation indexes for all TIPS. (In a new layout that I do not like.)

For I Bonds. This is the first month of a six-month string that will determine the I Bond’s new inflation-adjusted variable rate, which will be reset on May 1, 2027. One month of data is pretty meaningless.

From the report

In a worrisome trend, food at home prices were up 0.4% for the month, but we don’t know the annual trend. In September, the annual rate was only 1.8%.
Gasoline prices rose 0.8% for the month after rising 9.1% in September.
Fuel oil costs rose 2.0% for the month after rising 15.3% in September.
The beef index rose 0.9% in October.
Shelter costs were up 0.3% in October and accounted for about 0ne-third of the all-items increase.
Electricity costs were up 0.9% in the month.

For what it’s worth, here is the trend in all-items and core annual inflation over the last 12 months. Note the gaps at both ends of the chart:

What this mean for interest rates

The upside inflation surprise (despite the data flaws) probably signals that a 25-basis-point increase is coming at the Fed’s meeting December 8-9. Fed Governor Christopher Waller has raised the possibility of a 50-basis point increase in December, but I doubt that will happen.

From today’s Bloomberg report on market reactions:

Short-dated Treasuries bore the brunt of the selling, heading toward their worst day since April 2025. Two-year yields jumped 18 basis points to 4.74%. …

“The Fed could push for a more-aggressive tightening cycle with CPI continuing to print strong,” said Lindsay Rosner at Goldman Sachs Asset Management. “A December hike is our firm base case despite wider AI jitters, and stubborn inflation means we cannot rule out further hikes in 2027.”

“Today’s inflation report is a warning shot,” said Seema Shah at Principal Asset Management. “A December hike now looks locked in. The message for the Fed is uncomfortable but clear: the inflation fight is not finished.”

It’s going to be an interesting holiday season.

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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, Federal Reserve, I Bond, Inflation, Investing in TIPS, Savings Bond, TreasuryDirect | Tagged economics, economy, finance, inflation, investing | 5 Comments

Deflation could be coming (and don’t be surprised)

Posted on November 8, 2026 by Tipswatch

By David Enna, Tipswatch.com

Although 2026 could be an exception if fuel prices resume soaring, it is likely we will see at least one month of deflation — measured by non-seasonally adjusted inflation — before the end of the year.

The inflation report for October will be issued November 10, and it seems unlikely we will see a deflationary number for that month. The Cleveland Fed’s Inflation Nowcasting site is predicting all-items CPI at 0.24% and core CPI at 0.21% for October. That forecast is sometimes off, but it is a good guide.

National gas prices, according to AAA, fell to $4.23 at the end of October, down about 5% for the month. However, crude oil prices rose more than 13% for the month, and that is an indication gas prices could be moving higher — although prices eased last week.

This chart shows monthly non-seasonally-adjusted inflation numbers. It demonstrates just how common deflation is in the closing months of the year, a time of aggressive Black Friday discounting and end-of-year car deals:

Note in the chart that in 14 years, not a single year ended in deflation, and deflation certainly won’t happen for the year 2026. And yet, we have already had two months of deflation — June and July — which resulted from “peace talks” that cooled energy prices. I noted in my article on June inflation that the 0.35% decline was a “big surprise,” triggered by a 9.7% drop in gasoline prices.

Anything could happen in the months of November and December. If gas and energy prices simply stabilize, deflation is a possibility.

This is NSA — non-seasonally adjusted inflation. The headline number you hear reported each month is seasonally adjusted and is far less likely to dip into deflation in November and December, because the seasonal adjustments account for the expected discounting. For annual inflation, non-seasonal and seasonal differences balance out and the end result will always match.

NSA inflation is important because it is used to adjust principal balances for Treasury Inflation-Protected Securities and set future interest rates for Series I Savings Bonds.

One effect of this predictable end-of-year trend is that the I Bond’s next variable rate — based on inflation for the months of October through March — will start to look pretty awful. That picture almost always turns around in January and February, when non-seasonal inflation is likely to “surprise” to the high side.

Do I lose sleep at night worrying about late-year deflation eating away at I Bond interest rates or accrued inflation on TIPS? No. “Tis the season.”

Also see: Don’t over-think the potential threat of deflation

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Posted in Federal Reserve, I Bond, Inflation, Investing in TIPS | 9 Comments

My schedule … and what’s coming next

Posted on November 3, 2026 by Tipswatch

Lisbon, the ancient city of hills, great food, and wine. Tip: avoid the salted cod.

By David Enna, Tipswatch.com

Happy Election Day!

By the time the votes are being counted tonight, I will be on my way to one of my favorite cities, Lisbon, to begin a three-week trip in Portugal and southern Spain. I will try to keep up with politics or … ah, forget it.

But I will be keeping up with inflation news, and this will be my writing schedule while I am on this trip:

Sunday, Nov. 8: I will be posting an article about the potential for deflation in the closing months of the year (yes, even in 2026).

Tuesday, Nov. 10. The Bureau of Labor Statistics will release the October inflation report at 8:30 a.m. ET. On that day I will be en route to Carmona, Spain, where it will be 2:30 p.m. Central European Time. Most likely, I will not be able to put together an inflation analysis until well after the release.

This isn’t a crucial report, since the I Bond’s new inflation-adjusted variable rate was just set. But it will be highly meaningful for the Federal Reserve’s Open Market Committee, which will meet December 8 and 9 to decide on an increase to short-term interest rates. This report will strongly influence that decision.

Sunday, Nov. 15. I will post an analysis of the upcoming reopening auction for a 10-year TIPS, CUSIP 91282CRE3, which closed Friday with a real yield of 2.58% on the secondary market. The 10-year real yield has fallen 33 basis points since October 5. It will be interesting to see if this trend continues.

Thursday, Nov. 19. The reopening auction of the 10-year TIPS will close at 1 p.m. ET. At that time I will be in Madrid, where it will be 7 p.m. Too early for dinner in Madrid? We will see. The timing could work out for me to write a brief report.

I am notorious for traveling during deep declines in the stock market, bond-market chaos, outbreaks of regional wars, massive labor strikes, and even a COVID outbreak (I was in Egypt in February 2020.) Be warned.

Salted cod?

I am an adventurous eater and I will try just about anything in Portugal: Caldo verde, grilled sardines with heads on, squid with ink sauce, piri-piri chicken. On my first visit to northern Portugal, I had a cod stew that was absolutely delicious. Most likely, it was fresh cod (or a miracle).

All around Portugal, you can find salted cod (from Norway). There are entire supermarket sections devoted to “bacalhau” — the smell is similar to heavily used gym socks. I avoid getting anywhere near it. Restaurants serve “reconstituted salted cod,” which seems to be a treasured family favorite. It’s possible that when the chef does this perfectly the result is tasty, or at least edible. My option: Avoid it!

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Posted in Federal Reserve, Inflation, Investing in TIPS, Travel | Tagged investing, personal-finance, Treasury investments | 14 Comments

Treasury sets I Bond’s fixed rate at 1.40%; composite rate rises to 5.51%

Posted on October 30, 2026 by Tipswatch

A tip of my hat to the U.S. Treasury. Exactly the correct decision.

By David Enna, Tipswatch.com

The U.S. Treasury followed a decade-long tradition and set the fixed rate of the Series I Savings Bond at 1.40% for purchases from November 2026 through April 2027. That creates a highly attractive annualized composite rate of 5.51%.

The fixed rate of 1.40% — which is equivalent to the I Bond’s real yield above inflation — is the highest for the investment since November 2006. The composite rate, up from 4.26%, will make this I Bond highly competitive with other very safe investments, such as the 1-year T-bill currently yielding 4.42.%

An I Bond pays interest based on a semi-annual inflation rate (in this case 2.04% from April to September 2026) and a fixed rate (now 1.40%). Here is how the Treasury combines the two rates to get a composite rate of 5.51%:

The variable rate

The inflation-adjusted rate (often called the I Bond’s variable rate) is now 4.08%. That rate will apply to all I Bonds ever issued, with the starting date depending on the original month of purchase. The variable rate of 4.08% means that even I Bonds from past years with fixed rates of 0.0% will earn 4.08% for six months, a yield a bit above high-quality money market funds.

Here are the inflation numbers used to determine the variable rate:

The fixed rate

Here is the formula I have been using to forecast the Treasury’s fixed-rate decision: Apply a ratio of 0.65 to the average real yield of the 5-year TIPS over the last six months. This formula has worked, without fail, for 16 fixed-rate resets since November 2017. it is reassuring to see past practices continued.

The 0.65 ratio formula was discovered by Boglehead geniuses — and it worked — but a debate remained about when the six-month rate-setting period begins. In my forecasts, I have been using yields starting on May 1 and November 1, but some analysts argued the period should start and end 5 days earlier. Today’s result gave us a clear answer: the Treasury started the count on May 1. (Going 5 days early would have resulted in a fixed rate of 1.30%.) More on that here.

The fixed rate is crucial for I Bond investors because it creates the real yield over inflation. A fixed rate of 1.40% means an I Bond will out-perform future inflation by 1.40%. This is a solid fixed rate and means your investment can continue to surpass official U.S. inflation for as long as you hold the I Bond, up to 30 years.

The composite rate

The fixed rate of 1.40% and the inflation-adjusted variable rate combine to create six-month composite rate of 5.51%, which is very attractive. Keep in mind, however, that an I Bond has to be held for 1 year and then any redemption before 5 years will lose the last three months of interest. This new I Bond will keep the fixed rate of 1.40% forever, but get a new composite rate beginning six months after purchase.

In my opinion, I Bond investors should be looking to hold for 5 years and then cash out when they need the money.

The Treasury held its purchase cap at $10,000 per person per year. If you have already bought your 2026 allocation (as I have) you can get the 1.40% fixed rate and 5.51% composite rate for any purchase from January to April 2027.

EE Bonds

The Treasury set the fixed rate for Series EE Bonds at 2.90% for purchases from November 2026 to April 2027. That is up from the past rate of 2.40%. After 20 years, EE Bonds automatically double the original purchase amount, which creates an effective return of 3.53% if held for 20 years. Treasury says:

For EE bonds you buy now, we guarantee that the bond will double in value in 20 years, even if we have to add money at 20 years to make that happen.

A fixed rate of 2.90% is an improvement but isn’t highly attractive, and 3.53% for a 20-year investment doesn’t compare well with the 20-year Treasury bond yielding 5.35%.

I Bonds are attractive

Yes, you can earn a real yield of about 2.31% on a 5-year Treasury Inflation-Protected Security, a bonus of about 91 basis points. That’s hard to ignore and the TIPS is a highly attractive alternative. If you use the 0.65 ratio as a “fair value” yield for the I Bond, you get a fixed rate of 1.50%. So the TIPS has an advantage, even at the discounted rate.

I Bonds, however, have other advantages: Tax-deferred interest, rock-solid deflation protection, a flexible maturity date and no market fluctuations. I Bonds are well suited for use as a secondary emergency fund, constantly outpacing inflation, to be held for 5 years and then redeemed when you need the cash.

Haven’t bought in 2026? You are a genius and now you can purchase this attractive I Bond in November or December and then potentially again in 2027. When you are placing an order at TreasuryDirect, remember to buy near the end of the month to earn a full month of interest. In November, the 25th looks like a good target date.

You could also consider redeeming any of your remaining 0.0% or 0.1% I Bonds to raise cash to purchase this higher rate. When you redeem, you should do that early in a month, because you will earn no interest for month you redeem. Also be aware that you will owe federal taxes on the interest earned.

Also, remember that even 0.0% I Bonds will be earning 4.08% for six months, a rate that I bet beats the current yield on your money-market account.

Already bought in 2026? Are you like me? I bought my full allocation in April, before the May reset. There are ways to get around the $10,000 limit, using purchases through the gift-box loophole, trusts, or business-owner strategies. The gift box only works for investors with a trusted partner.

I am souring on the gift box, so I will hold off until 2027 to buy into this new I Bond. In this case, it looks wise to hold off on purchases until mid-April, to get an idea of the upcoming variable and fixed rates heading toward us on May 1.

Final thought

I appreciate that the U.S. Treasury followed tradition and allowed I Bond investors to get an attractive real yield and composite rate. Well done.

• 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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Posted in Cash alternatives, EE Bonds, Federal Reserve, I Bond, Inflation, Investing in TIPS, Savings Bond, TreasuryDirect | 72 Comments

A historically awful 5-year TIPS matured Oct. 15. How did it do as an investment?

Posted on October 28, 2026 by Tipswatch

David Enna, Tipswatch.com

On October 21, 2021, the Treasury offered $19 billion in a new 5-year Treasury Inflation-Protected Security, CUSIP 91282CDC2, generating the lowest real yield at auction in the 29-year history of this investment, -1.685%. These were very dark days for investors in TIPS.

In my recap of this auction, I wrote:

The auction result doesn’t mean that investors were accepting a negative nominal return, but they were willing to pay a 9% premium to par value to collect a 0.125% coupon rate plus five years of inflation accruals. To put this another way, official U.S. inflation will have to increase about 9% before investors reach a breakeven point on this investment.

That is actually scary. But you know what? CUSIP 91282CDC2 ended up being a decent investment, at least versus the nominal 5-year Treasury available in October 2021. Here is the final tally for this 5-year TIPS:

Note the nominal return in the final column: 2.375%. In October 2021, a 5-year Treasury note was yielding 1.20%. Over the ensuing 5 years, inflation ended up running at an annual rate of 4.1% (rounded) versus the auction’s inflation breakeven rate of 2.89%. The result is that the TIPS outperformed the Treasury note by a wide margin, as has been the case for all TIPS maturing in recent years.

Click on image for larger version. See more data on my Tips vs. Nominals page.

This reinforces a simple point: A TIPS will out-perform a nominal Treasury of the same term when inflation runs higher than expected. Inflation has been running much higher (4.1%) than expected over the last five years. Over the last decade, inflation-breakeven rates for TIPS have rarely exceeded 2.5%, and often were much lower.

This auction was unique because the real yield was deeply negative and the inflation breakeven rate was unusually high (2.89%), and the TIPS still outperformed.

I Bonds were the winner

In my preview of the 2021 auction, I noted that I Bonds (with a 0.0% fixed rate at the time) were a much more attractive investment. The math is simple: The I Bond would match official U.S. inflation while the TIPS would trail inflation by 1.685%. I wrote:

For a small-scale investor, in October 2021, an I Bond makes a heck of a lot more sense than a comparable TIPS.

The October 2021 I Bond — with a 0.0% fixed rate — has had about a 4.3% compounded rate of annual return over five years, much better than 2.375% for the TIPS and 1.20% for the Treasury note. (Source: Eyebonds.info)

What about bond funds?

Vanguard’s Total Bond Fund (BND) has had a total annual return of -0.29% over the last five years. Ouch.
The iShares TIPS ETF (TIP), which holds the full range of maturities, has had a total annual return of -0.05% over the last five years. Also ouch.
Vanguard’s Short-Term TIPS ETF (VTIP), which holds TIPS with maturities less than five years, looks better with a total 5-year annual return of 2.93%, better than the October 2021 TIPS (2.375%) but worse than the I Bond at 4.3%.

Bond funds had been doing a bit better going into 2026, but the sharp rise in longer-term yields has hit full-maturity-spectrum funds hard.

Thoughts

Two very important takeaways: 1) An I Bond — even with a fixed rate of 0.0% — will be an 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.

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

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