Real Yield On New 5-Year TIPS Dips Deeply Negative, At -0.32%

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

5-year TIPS history

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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