Take Caution: This Week’s 10-Year TIPS Reopening Will Be Pricey

Summary

  • The real yield is likely to come in around 0.57%, well below the coupon rate of 0.875%.
  • That means buyers could be paying a premium of nearly 3% to capture that coupon rate. Is that too high a price to pay?
  • The inflation breakeven rate is currently running at about 1.82%, meaning this TIPS is close to fair value versus a nominal Treasury.

The U.S. Treasury announced last week that it will offer $11 billion in a reopening auction Thursday of CUSIP 9128285W6, creating a 9-year, 8-month Treasury Inflation-Protected Security.

Read my full analysis on SeekingAlpha.com

About Tipswatch

Author of Tipswatch.com blog, David Enna is a long-time journalist based in Charlotte, N.C. A past winner of two Society of American Business Editors and Writers awards, he has written on real estate and home finance, and was a founding editor of The Charlotte Observer's website.
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