New 5-Year TIPS Auction Is Suddenly Looking Like A Loser

Summary

  • Real yields have declined sharply in recent days, dropping the 5-year yield to 0.03%.
  • When the 5-year TIPS yield approaches zero, I Bonds and bank CDs become attractive alternatives.
  • Inflation expectations have been declining over the last month, even as demand for TIPS rises.

The U.S. Treasury on April 20 will auction $16 billion in a new 5-year Treasury Inflation-Protected Security (CUSIP 912828X39). The coupon rate and real yield to maturity (after inflation) will be determined at the close of the auction.

Read my full analysis on SeekingAlpha.com

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3 Responses to New 5-Year TIPS Auction Is Suddenly Looking Like A Loser

  1. Joseph Keenan says:

    Even though inflation projections are fairly tame, in a five year period it could be higher than Fed goal. I will be maxing out my Ibonds, so this purchase would be after Ibond allotment. I like the inflation protection that I will be getting even though rates are low. Am I wrong?

  2. Jimbo says:

    With a current yield of -0.18%, 5 year TIPS are dogs right now. A month ago, it was flirting with zero. I was hoping that it would be in positive territory by now. Nope. So, this is another auction that I’ll have to pass on.

    Back in 12/14, these were yielding nearly 0.4%. Due to deflation, the adjusted principal value has only gone up a little over 1%. I’m getting more than that in an IRA savings account. I love the concept of inflation adjusted bonds, but the reality of the matter is that they are poor investments.

  3. jim says:

    NOT a good deal. I’m gonna pass on this one!!

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