It’s been a sorry year for buy-and-hold investors in Treasury Inflation-Protected Securities, with yields plummeting to ever-lower all-time records. That means TIPS – like all Treasuries – are very expensive and produce little income. There are currently 35 TIPS issues trading on the secondary market, and 32 of those have negative-to-inflation yields. You have to go all the way out to an issue maturing in February 2040 to get a positive yield, 0.256% plus inflation.

The TIP ETF saw some volatility in prices but still had a 4.7% gain for the year. Click on image for larger view

On the other hand, TIPS traders and mutual fund holders have had a decent year. Even though the TIP ETF took a dip after the Federal Reserve announced QE4 this month, its net asset value is up about 4.7% for the year.

Just like last year, TIPS buyers found their best purchases early in the year, as TIPS yields declined steadily. Here’s a recap of the year’s auctions:

10 year TIPS, CUSIP 912828SA9

First auctioned: Jan. 19, 2012, with a yield-to-maturity of -0.046%. This was the first 10-year TIPS in history to auction with a negative yield, but the rate was expected to be lower just before the auction. So this one ended up being the best buy of the year.

Reissued: March 22, 2012, with a yield to maturity of -0.089%. Today, this still looks attractive.

Reissued: May 17, 2012, with a yield to maturity of -0.391%.

Hard to believe this issue currently trades at -0.841%, meaning the January buyers are sitting on a gain of more than 8%.

3o-year TIPS, CUSIP 912810QV3

First auctioned: Feb. 16, 2012, with a yield to maturity of 0.770%. I viewed this issue positively back in February, despite the long-term commitment. It actually went off at a discount to its 0.75% coupon rate (that’s a rarity in TIPS auctions these days).

Reissued: June 21, 2012, with a yield to maturity of 0.520%.

Reissued: October 18, 2012, with a yield to maturity of 0.479%. Each of these auctions set a record low for a 30-year TIPS.

Today this issue trades on a secondary market at 0.335%, meaning the original buyers are sitting on a capital gain of more than 10% for an issue they bought at a discount.

5-year TIPS, CUSIP 912828SQ4

First auctioned: April 14, 2012, with a yield to maturity of -1.080%. Although I have tried to warm up to short-term TIPS, I just can’t accept a yield more than 1% below inflation. Back in April, I issued a call to buy I Bonds instead, which was probably my wisest advice of the year.

Reissued: Aug. 23, 2012, with a yield to maturity of -1.286%.

Reissued: Dec. 20, 2012, with a yield to maturity of -1.496%. Each of these auctions set a record low for a 5-year TIPS.

This issue currently trades on the secondary market at -1.485%, about where it auctioned 10 days ago.

10-year TIPS, CUSIP 912828TE0

First auctioned: July 31, 2012, with a yield to maturity of -0.637%. By mid-year, TIPS yields were nearly hitting rock bottom. It’s significant that they have been pretty much holding at these very low levels for six months — despite the ‘fiscal cliff’ scare and the Fed’s commitment to QE4.

Reissued: Sept, 20, 2012, with a yield to maturity of -0.750%.

Reissued: Nov. 21, 2012, with a yield to maturity of -0.720%. This auction was a milestone because the TIPS yield didn’t set a record low — it’s been many months since that happened.

This issue currently trades on the secondary market at -0.787%, a bit lower but still pretty close to the original auction price.