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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I Bond Investors: Here’s A Buying Guide For 2019

Summary

  • Be patient: Because the I Bond’s fixed rate of 0.50% is locked in through April 30, there is no need to rush to purchase.
  • Is a higher fixed rate possible in 2019? Yes, but the current trend doesn’t make that look likely. A lot can change, though.
  • Should you redeem older I Bonds with a fixed rate of 0.0% and redeem at a higher rate? This makes sense for some investors.

With each new year, dedicated investors in U.S. Series I Savings Bonds face the inevitable question: When to buy? And this year, they might face an additional question: Should I buy?

Read my full analysis on SeekingAlpha.com

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2018: Recapping The Year In Inflation-Protected Investments

Summary

  • Both real and nominal yields climbed sharply in 2018, especially for shorter terms. The yield curve has dramatically flattened, possibly pointing to an economic slowdown.
  • TIPS auctions were a mixed bag in 2018: the 30-year auctions were unattractive, the 10-year auctions were acceptable, and the 5-year auctions became stellar.
  • The I Bond’s fixed rate climbed to 0.5%, much higher than recent levels. But a higher rate could still be coming in 2019. Hold off on purchases in 2019.

Read my full analysis on SeekingAlpha.com

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5-Year TIPS Reopening Gets Real Yield Of 1.129%, Highest In Nearly 10 Years

Summary

  • You have to go back to April 2009 to find a 4- to 5-year TIPS auction with a higher real yield.
  • The inflation breakeven rate came in at 1.51%, very low by recent trends and a favorable indicator for investors.
  • At one point just after the auction closed, this 5-year TIPS was trading with a higher real yield than comparable 10-, 20- and 30-year TIPS.

Read my full analysis on Seeking Alpha.com

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This Week’s 5-Year TIPS Auction Is A ‘Screaming Buy’

Summary

  • The real yield could be about 1.12%, the highest after-inflation yield in nearly 10 years of 4- to 5-year TIPS auctions.
  • The real yield curve has inverted, with the 5-year TIPS now yielding about 6 basis points more than a 10-year TIPS.
  • The inflation breakeven rate is currently a very reasonable 1.60%, making this TIPS desirable versus a nominal 5-year Treasury, and still competitive with best-in-nation bank CDs offering 3.5%.

Read my full analysis on SeekingAlpha.com

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