Upcoming 5-year TIPS auction

Update: This 5-year TIPS was auctioned April 21 with a base yield of -0.18%.

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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.

Update:

Yes or no on the 5-year Treasury Inflation-Protected Security?

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2 Responses to Upcoming 5-year TIPS auction

  1. Pingback: More on the upcoming 5-year Treasury Inflation-Protected Security | Treasury Inflation-Protected Securities

  2. Pingback: Inflation indicators and the 5-year TIPS auction | Treasury Inflation-Protected Securities

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