Update: This 5-year TIPS was auctioned April 21 with a base yield of -0.18%.
Announcement date: April 14, 2011
Security term: 5- year
CUSIP Number: 912828QD5
Auction Date: April 21, 2011
Issue Date: April 29, 2011
If you are interested in purchasing this security, go to TreasuryDirect.gov for more information.
Should you buy it? The last 5-year TIPS issue was in November 2010, and it went out at a yield of 1.33% above inflation. No way this April 2011 issue will have a yield that high. In fact, this TIPS could have a negative base rate of around -0.2% to -0.3%.
If you are holding to maturity:
Yes, if you have money parked in a money-market fund earning near zero. If inflation runs at 3.0% over the next five years, you would earn 2.8% on this TIPS, better than you can get with a bank CD.
Or, maybe you want to take some stock market profits off the table.
Another benefit is that you can roll this over in 5 years.
No, if you think the base rate on TIPS will be moving soon to near its historic normal rate around 2%. Then I think it would make sense to keep the money parked and wait for a better rate.
Personally, I plan to buy a modest share of this TIPS.
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