Summary
- The new Treasury reality is negative real returns and stunningly low inflation expectations.
- The auction result of a real yield to maturity of -0.320% matched the Treasury’s overnight estimate.
- The inflation breakeven rate of 0.69% makes this TIPS – even with a negative real yield – much more desirable than a five-year nominal Treasury. But there are better alternatives.
Today’s Treasury auction of $17 billion in a new five-year Treasury Inflation-Protected Security – CUSIP 912828ZJ2 – reflected a new reality of ultra-low yields and grim inflation expectations.
Investors got a real yield to maturity of -0.320%, the lowest for any TIPS auction of this term in five years.
Read my full analysis on SeekingAlpha.com
Of course nothing is for sure, as David has said, the treasury could change the way they compute the fixed…