New 10-Year TIPS Auctions With A Real Yield Of 0.548%, Highest In 2 Years

Summary

  • The real yield of 0.548% was the highest for any 9- to 10-year TIPS auction since January 2016.
  • The coupon rate was set at 0.500%, the first time in history that any 10-year TIPS received this coupon rate.
  • The inflation breakeven rate climbed to 2.06%, highest in more than three years.

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New 10-Year TIPS Auction Jan. 18 Is Definitely Worth A Look

Summary

  • The current real yield estimate of 0.54% would be the highest at auction since January 2016.
  • The inflation breakeven rate has inched up to 2.01%, but that’s still attractive enough versus the nominal Treasury’s yield of 2.55%.
  • Looking ahead: 5 more auctions of this maturity in 2018.

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U.S. Inflation Rose 0.1% In December, Slightly Below Expectations

Summary

  • The headline miss probably isn’t significant, but core inflation rose 0.3%, above the consensus estimate of 0.2%.
  • Non-seasonally adjusted inflation dipped 0.06% in December and I Bond investors may be facing a weak variable rate reset on May 1.
  • Wages increased faster than inflation in December, the BLS said. That’s a trend worth watching. If it continues; real inflation could follow.

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I Bond Investors: Here’s Your Buying Guide For 2018

Summary

  • Wait at least until the March inflation number is announced on April 11.
  • You then enter a three-week ‘limbo period’ when you can decide to buy before or after the May 1 rate reset.
  • Don’t bother buying I Bonds as a short-term investment. You can do better with one-year, best-in-nation bank CDs.

Read my full analysis on SeekingAlpha.com 

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Recapping 2017: The Year In Treasury Inflation-Protected Securities

Summary

  • The year was marked by rising short-term real yields, as longer-term yields held stable or declined.
  • If economic growth continues, longer-term real yields should begin rising. Watch for the 10-year real yield to climb toward 1.0%.
  • The year’s TIPS auctions offered a couple of buying opportunities. Not spectacular, but solid, safe investments.

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5-Year TIPS Reopening Auctions With A Real Yield Of 0.370%

Summary

  • The after-inflation yield of 0.370% was the highest in two years for any 4- to 5-year TIPS auction.
  • Reaction to the auction looks positive, with the TIP ETF rising minutes after the close, indicating higher demand.
  • The inflation breakeven rate came in at 1.87%, a bit higher than recent trends. This is another indication of good demand for this issue.

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The Year’s Most Attractive TIPS Auction Could Be Coming Dec. 21

Summary

  • Short-term TIPS have attractive real yields, at least compared with longer maturities.
  • Watch out for volatility in the Treasury market next week in the days leading up to the auction.
  • The current inflation breakeven rate is about 1.81%, not cheap. This TIPS is fairly priced versus a nominal Treasury.

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