By David Enna, Tipswatch.com
All week, I have been calling today’s auction of $21 billion in a new 10-year Treasury Inflation-Protected Security — CUSIP 91282CPU9 — the hardest to forecast in a decade.
At times, the most recent 10-year TIPS on the secondary market was trading with a real yield as low as 1.82%, but the Treasury was estimating a real yield of 1.97% on Tuesday. That’s a gigantic spread.
The reason for this week’s volatility, early on, was clearly President Trump’s implicit threats against Greenland and potential new tariffs on much of Europe. But on Wednesday that all turned around with a “framework” of a deal on Greenland and dismissal of the tariff threat.
A key auction question remained: How much trust will investors — especially foreign investors — have in U.S. Treasurys amid this turmoil?
Today’s auction results could have been an indication of slipping trust. The when-issued forecast for the auction, released just before the close, was for a real yield 0f 1.92%. The end-result of 1.940% is a pretty big miss, indicating weak demand. The bid-to-cover ratio was 2.38, not bad.
The auction set the coupon rate for this TIPS at 1.875%.
Definition: The “real yield to maturity” of a TIPS is its yield above official future U.S. inflation, over the term of the TIPS. So a real yield of 1.940% means an investment in this TIPS would provide a return that exceeds U.S. inflation by 1.94% for 10 years..
This is the first TIPS ever issued that will mature in 2036, so it was probably in high demand for small-scale investors building ladders of TIPS into future years. For those investors, a real yield of 1.940% was a pleasant surprise. Here is the trend in the 10-year real yield over the last year:
Pricing
Because the coupon rate of 1.875% was set below the real yield of 1.940%, investors got a discounted unadjusted price of 99.413260. In addition, this TIPS will carry an inflation index of 0.99779 on the settlement date of January 30, caused by deflation of -0.46% reported for November 2025. With that information, we can calculate the cost of a $10,000 par value investment in this TIPS:
- Par value: $10,000.
- Principal purchased on settlement date: $10,000 x 0.99779 = $9,977.90.
- Cost of investment: $9,977.90 x 0.99413260 = $9,919.36
- + accrued interest of $7.75.
In summary, an investor purchasing $10,000 par value at today’s auction is paying $9,919.36 for $9,977.90 of principal on the settlement date. From then on, the investor earns accruals matching future inflation for 10 years, plus an annual coupon rate of 1.875% paid on inflation-adjusted principal.
Inflation breakeven rate
At the auction’s close, the 10-year Treasury note was trading with a nominal yield of 4.25%, which creates an inflation-breakeven rate of 2.31%, more or less in line with recent trends. This means the TIPS will out-perform the nominal Treasury if inflation averages more than 2.31% over the next 10 years.
Here is the trend in the 10-year inflation breakeven rate over the last year:
Thoughts
For months, I have been signaling I was going to be a buyer at today’s auction, as long as real yields held up. And, yes, I was a buyer. It was a strange and uncertain week, maybe in line with of our “new normal.” Both the stock and bond markets have rebounded nicely from the early-week turmoil.
This will most likely be my only TIPS purchase of the year. But investors interested in building TIPS ladders should continue watching yields for TIPS maturing in 2040 and beyond, all with real yields of 2.0% and higher, sometimes much higher.
Will real yields surge higher because of a “sell-America” trade or begin falling as the Federal Reserve eventually resumes rate cuts later this year? I have no idea, honestly. But buying a TIPS with an above-inflation yield of 1.94% — and holding to maturity — is a safe-enough bet for me.
Coming up: On Sunday, I will post my I Bond buying guide for 2026. Watch for that.
Meanwhile, here is a summary of recent results for 9- to 10-year TIPS auctions:
• Confused by TIPS? Read my Q&A on TIPS
• TIPS in depth: Understand the language
• TIPS on the secondary market: Things to consider
• TIPS investor: Don’t over-think the threat of deflation
• Upcoming schedule of TIPS auctions
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David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
Treasury Inflation-Protected Securities 
hi David, I wanted to run a question by you. In response to an earlier article, one of your readers asked if there was any benefit to buying at the January auction versus waiting for a re-opening later in the year. Your reply was essentially “no.” But in my mind, there IS some potential benefit to buying “early” (i.e., before the TIPS accrues value). I’ll explain: While the YTM is always my primary and utmost consideration when comparing/buying TIPS on the secondary market, i also pay attention to the coupon rate and the cost vs. par — with preference toward higher coupon rate and/or cost below (or near) par. That is because, in the tail-risk event of an extended depression that results in dramatic and/or stubborn DEflation, we always get the coupon payments and (upon maturity) receive the par value of the TIPS. My point is that getting paid a higher coupon rate and paying below par are in fact hedges against the possibility of future deflation. That risk may be small, but it is unknowable. So, is there not some potential benefit to buying at auction (below par) even if YTM remains the same at the time of a future purchase, or is there something i’m missing?
I did not buy. With all the chaos I was not sure I wanted to add to my ladder. I may feel differently a couple of years down the road but for now I am beginning to think investors will demand a higher return for U.S. debt. I do believe inflation will persist so hopefully, so maybe I will get another opportunity in the future. Thank you for updating us. It is comforting to know there are still some reliable places to go for honest information.
There will be 5 more auctions of this term in 2026, including a new 10-year in July, so there will be plenty of opportunities. Plus the secondary market, of course.
As others noted, yields seemed be 1.85 or so and this is a surprise.
I have a theory, “Sell America” is underway. The Europeans might not be selling on the secondary market but simply not rolling over existing bonds. Why take a loss when you can just wait for full price?
Real yield 1.94% was better than i expected, as the Bloomberg site said 1.85 last night when i placed my order. Because yields have been so volatile this week, i hedged (hesitated?) and purchased only half of my 2036 ladder allocation at today’s auction. I’ll keep an eye on real yields and probably buy the other half sometime this year on the secondary market. Thank you, David, for all you do to educate us on our journeys to wealth preservation.
I was a buyer and am very pleased. If inflation over the next 10 years is < 2.3% or so I would both be surprised and have addressed my greatest financial risk.
Next year I have several 5% or so CDs maturing and will put those in the 2037 TIPS offerings – they were nice while they lasted.
The 10-year TIPS market yield today on CNBC at https://www.cnbc.com/quotes/US10YTIP did not show a daily high above 1.900% so not sure how a real yield can be so much higher. Even last night’s Treasury real yield webpage was lower than 1.940% so not sure if the daily market value on CNBC is useful on the day of auction. Feeling confused about today’s great outcome.
The yield you see on CNBC is for secondary market trading of the most recent TIPS, issued in July 2025. That can be a decent indicator, but is always going to be off a bit in an auction for a new TIPS, especially in a volatile week. Secondary market trading is pretty light compared with a $21 billion auction.