5-Year TIPS Reopening Gets Real Yield Of -0.766%, Lowest Since 2013

Summary

  • 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.

Read my full analysis on SeekingAlpha.com

5-year TIPS

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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2 Responses to 5-Year TIPS Reopening Gets Real Yield Of -0.766%, Lowest Since 2013

  1. Bob says:

    Would you please consider writing an article about how to SELL tips held in a Treasury Direct account?

    • Tipswatch says:

      I have to admit I have never sold a TIPS; I always hold them to maturity. This is what TreasuryDirect says as instructions:

      To sell a TIPS held in TreasuryDirect or Legacy Treasury Direct, first transfer the TIPS to a bank, broker, or dealer, then ask the bank, broker, or dealer to sell it for you.

      How you transfer a TIPS to a bank, broker, or dealer depends on whether you hold the TIPS in TreasuryDirect or Legacy Treasury Direct.

      For a TIPS held in TreasuryDirect:
      Go to “Manage Direct”
      Choose “Transfer securities”
      Identify the TIPS you want to transfer
      Choose “External Transfer”
      Click the link for FS Form 5511, “TreasuryDirect Transfer Request”
      Complete FS Form 5511 and mail it as directed on the form
      For a TIPS held in Legacy Treasury Direct, complete “Security Transfer Request” (FS Form 5179) and mail it as directed on the form

      Here is the link: https://www.treasurydirect.gov/indiv/research/indepth/tips/res_tips_sell.htm

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