Falling Gas Prices Leave U.S. Inflation Unchanged In November

Summary

  • Headline inflation came in at 0.0% in November and was up 2.2% year-over-year. Core inflation was up 0.2% for the month and 2.2% for the year.
  • Non-seasonally adjusted inflation actually fell 0.33% in November, which means investors in TIPS will take a hit in January, as principal balances decline.
  • Overall inflation remains moderate. We have not entered a deflationary period.

Read my full analysis on SeekingAlpha.com

Also, I’ve updated my Inflation and I Bonds page with the November numbers.

And here are the new January Inflation Indexes for all TIPS.

 

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10-Year TIPS Auctions At 1.109%, Highest In Nearly 8 Years

Summary

  • The last time a 9- to 10-year TIPS auctioned with a real yield above 1.00% was on January 20, 2011, at 1.17%.
  • Buyers got this TIPS at a substantial discount because the real yield was well above the coupon rate of 0.750%.
  • The inflation breakeven rate came in at 1.99%, lower than in recent auctions. Another good sign for investors.

Read my full analysis on SeekingAlpha.com

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Is It Time To Buy TIPS ETFs, Mutual Funds?

Summary

  • TIPS funds have taken a hit in 2018, but that damage has been partially ¬†offset by distributions caused by rising inflation.
  • The total return of shorter-term TIPS funds remains positive for the year, thanks to a shorter duration and higher inflation.
  • A lot of the risk in TIPS funds has been wrung out, especially for shorter-term funds. Risk remains, but at an acceptable level?

Read my full analysis on SeekingAlpha.com

Year-to-date performance for TIPS ETFs

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Wednesday’s 10-Year TIPS Auction Still Looks Attractive

Summary

  • The real (after-inflation) yield looks likely to top 1.00% for the first time for any 9- to 10-year TIPS auction since January 2011.
  • The inflation breakeven rate is currently a reasonable 2.02% and should attract strong demand at this auction.
  • Buy it or not? Well, do you think interest rates will continue to rise, or have peaked? A tempting 5-year reopening is coming in December.

Read my full analysis on SeekingAlpha.com

10-year real yields

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U.S. Inflation Rose 0.3% In October, Highest Since January

Summary

  • Higher gasoline prices accounted for more than one-third of the increase in headline inflation, the BLS reported.
  • But crude oil prices began declining in October, which should be reflected in near-term gasoline prices.
  • Both headline and core inflation matched expectations, so there should be little market disruption from Wednesday’s report.

Read my full analysis on SeekingAlpha.com

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Great News For I Bond Investors: Treasury Raises Fixed Rate To 0.50%

Summary

  • I Bonds purchased from November through April will carry a composite rate of 2.83%, based on a fixed rate of 0.50% and inflation rate of 2.32%.
  • The fixed rate of 0.50% is the highest in 10 years, and means the return on I Bonds is likely to at least match inflation, even after federal income taxes.
  • The Treasury held firm on the 0.1% fixed rate for EE Bonds, but also retained terms that double their value in 20 years, for an effective interest rate of 3.5%.

Today’s announcement is very good news for I Bond investors, even for those who have already purchased their allocation for 2018. (The Treasury limits purchases to $10,000 per person per year.) But that clock restarts on January 1, so all investors will have access to the 0.50% fixed rate through April.

Read my full analysis on SeekingAlpha.com

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30-Year TIPS Reopening Auctions With A Real Yield Of 1.235%

Summary

  • The after-inflation yield of 1.235% was higher than where this TIPS was trading in the secondary market. That indicates weak demand.
  • The yield was the highest for any 29- to 30-year TIPS auction since February 2014.
  • The inflation breakeven rate came in at 2.13%, in line with recent auctions of this term.

Read my full analysis on SeekingAlpha.com

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