Summary
- The Treasury will offer a new 10-year TIPS at auction Thursday. Real yields are currently running at about 0.09%.
- TIPS have had a great run over the last year, but wasn’t the time to buy a year ago?
- The current inflation breakeven rate of 1.75% is reasonable, but inflation expectations have been rising, making TIPS more expensive versus nominal Treasurys.
The U.S. Treasury will offer $14 billion in a new 10-year Treasury Inflation-Protected Security at auction Thursday. This is CUSIP 912828Z37, and the coupon rate and real yield to maturity will be determined by the auction.
I’m not likely to be a buyer, even though 10-year issues are the “sweet spot” of TIPS investing, usually offering the optimal above-inflation yield versus length of term. But right now real yields on TIPS – across all maturities – are too low to make them attractive.
Read my full analysis on SeekingAlpha.com
Treasury Inflation-Protected Securities 
I’d recommend buying in gradually to any TIP ETF right now, after an 8.5% total return in 2019. I generally use the TIP ETF as my example in writing about TIPS funds, because it holds all TIPS and it is huge and easily traded. (I don’t own any TIPS mutual funds or ETFs personally.)
Full range TIP ETFs:
TIP:
total assets: $21 billion
Avg volume: 1.2 million
Expense ratio: 0.19%
Holdings: 41
SCHP:
total assets: $8.9 billion
avg volume: 697,000
Expense ratio: 0.05%
Holdings: 42
Because of the lower expense ratio, I’d prefer SCHP.
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Shorter-term ETFs:
VTIP:
total assets: $7.3 billion
avg volume: 694,000
expense ratio: 0.06%
Holdings: 16
STIP:
total assets: $2.4 billion
avg volume: 101,197
expense ratio: 0.06%
Holdings: 18
TDTT
total assets: $1.16 billion
avg volume: 57,000
expense ratio: 0.18%
holdings: 24
In this case, I’d prefer Vanguard’s VTIP, the biggest, most heavily traded, and tied for lowest cost.
(I am just a journalist, not a financial adviser, so keep that in mind.)
Back in 2016, I wrote about the hidden risks in TIPS funds. They aren’t diversified and are more volatile than “core” bond funds with a wide range of holdings: https://seekingalpha.com/article/4003690-investors-should-know-tips-etfs-and-mutual-funds-are-riskier-you-think
Hi David,
I am 72 and looking to add a TIPS ETF to my retirement portfolio. It will constitute 15-25% of my portfolio.
Any thoughts of which of the following ETFs represents the best value at the moment looking forward?
iShares TIPS Bond ETF
iShares 0-5 Year TIPS Bond ETF
FlexShares 3-Year TIPS ETF
Thanks