This New 5-Year TIPS Might Look Ugly, But It Has Appeal

Summary

  • The U.S. Treasury will offer a new 5-year TIPS at auction Thursday.
  • The real yield looks likely to come in around -1.21%, which is pretty awful but isn’t a record low.
  • The only way to judge this TIPS is to compare it with other very safe investments of similar term. How does it measure up?

The U.S. Treasury on Thursday will offer $17 billion at auction in a new 5-year Treasury Inflation-Protected Security, CUSIP 91282CAQ4. The real yield to maturity and coupon rate will be set by the auction, but we already know, the terms are going to look fairly awful.

But in the current environment of ultra-low interest rates for safe investments, this TIPS should be considered “above average.” Why? Because it provides a hedge against unexpected future inflation.

Read my full analysis on SeekingAlpha.com

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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