New 10-Year TIPS Gets Real Yield Of -0.93%, Lowest In History

Summary

  • There have been 104 auctions of this 9- to 10-year term since 1997 and today’s result was a record low yield, by a large margin.
  • The inflation breakeven rate came in at 1.52%, a reasonable number but higher than recent trends. Inflation expectations are slowly rising.
  • Reaction to the auction looked mixed, with TIPS yields rising slightly after the auction’s close at 1 p.m. EDT.

The U.S. Treasury just completed its auction of $14 billion in a new 10-year Treasury Inflation-Protected Security, with a historic result: A real yield to maturity of -0.93%, the lowest in the 23-year history of TIPS auctions of this term.

This is CUSIP 912828ZZ6, and it got a coupon rate of 0.125%, the lowest the Treasury will allow for a TIPS. That means investors at today’s auction had to pay a huge premium for this TIPS: an adjusted price of about $111.03 for about $100.01 of value, after accrued inflation and interest are added in.

Read my full analysis on SeekingAlpha.com

10-year TIPS auctions

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 New 10-Year TIPS Gets Real Yield Of -0.93%, Lowest In History

  1. timmy says:

    so the real yield is -.93%. So after 10 years if there is no inflation you would los3 9.3% and gain 1.25%. So could you write that loss off in a taxable account??? Sorry if I fully don’t understand this. I saw on the secondary market 30 year tips are at -.44% today. That’s crazy.

  2. Tipswatch says:

    You’d be paying regular income taxes on the 0.125% each year, and at the end of the 10 years, if there had been zero inflation, you would have a capital loss and you’d receive the original par value of your investment.

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