- Demand looked strong at this auction, with the real yield falling about 7 basis points from the secondary market’s yield earlier in the morning.
- The inflation breakeven rate came in at 1.10%, a reasonable number given our uncertain deflationary future.
- A 5-year TIPS is still a more attractive investment than a 5-year nominal Treasury note, currently yielding 0.33%. But there are alternatives.
The U.S. Treasury just announced that its reopening auction of a 5-year TIPS, CUSIP 912828ZJ2, resulted in a real yield to maturity of -0.766%, the lowest for this term at auction since April 2013.
The “real yield to maturity” indicates how this 4-year, 10-month Treasury Inflation-Protected Security will perform against official U.S. inflation. Investors at Thursday’s auction were willing to accept a return that will trail inflation by 0.766% over nearly five years.