The US Treasury just formally announced it will reopen CUSIP 912828C99 at auction next Thursday, creating a 4-Year 8-Month Treasury Inflation-Protected Security with a coupon rate of 0.125%.

This TIPS was originally auctioned on April 17, with a yield to maturity of -0.213%, plus inflation. Buyers at that auction paid about $101.87 for $100 of value because of the spread between the yield and the coupon rate.

What can we expect? Since April, yields on TIPS have been sinking, dropping to a low for the year of -0.44% in late May. Recent strength in the overall bond market has again pushed TIPS yields to near their yearly lows.

• Bloomberg’s Current Yields page shows a yield of -0.44% for CUSIP 912828C99 on today’s secondary market.
• The Wall Street Journal’s Closing Prices page shows a closing yield of -0.418% for this TIPS on Wednesday.
• The Treasury’s Real Yields page – which estimates the yield on a full-term 5-year TIPS – shows -0.29%, a fairly wide variance from the other two real-world measurements.

Let’s set aside the Treasury’s number and for now let’s estimate a yield of about -0.420% for next week’s auction. That would mean buyers will pay about $102.50 for $100 of value, plus chip in more than $1 for accrued inflation. That’s pretty pricey for a 0.125% coupon rate.

This chart tracks the longer-term trend for yields on 5-year TIPS, showing the wild swing of more than 500 basis points from the depth of the recession to Fed-induced ultra-low rates of 2012:

It’s impossible to figure what’s ‘normal’ from that chart, but certainly the peak and the nadir can be ruled abnormal. The pre-recession yields above 1% generate nostalgia, but that’s about it. Let’s work on getting above zero.

I personally won’t be participating in next week’s auction, unless yields climb dramatically in the next seven days.

Alternative? I repeat again that buying US Savings I Bonds up to the limit is a much better investment than a 5-year TIPS paying -0.41%. I Bonds currently pay 0.1% above inflation. That is 51 basis points better than a TIPS, and I Bonds are more flexible investments and the interest is tax deferred.

Here is a chart of 4- to 5-year TIPS auctions since 2007. Check it out and tell me if you can figure out what would pass for a ‘normal’ yield in 2014, minus Fed manipulation and simmering world turmoil: