There Are Reasons To Like This New 10-Year TIPS

Summary

  • The real yield for CUSIP 912828ZZ6 could end up around -0.82%, the lowest in the 23-year history of TIPS auctions of this term.
  • Fears of future inflation – spurred by massive monetary and fiscal stimulus programs – should attract investors.
  • The inflation breakeven rate will be around 1.46%, a reasonable number. But if the inflation hawks are right that 1.46% number will look very attractive.

Here’s the question: Would you prefer a 10-year TIPS yielding 0.82% less than inflation or a 10-year Treasury note with a nominal yield of 0.64%? And how will these investments perform under a scenario of possible rising inflation?

Read my full analysis on SeekingAlpha.com

TIPS auction 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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