Treasury Inflation-Protected Securities

• Series I Savings Bonds purchased through April 30 will have a permanent “real yield” of 0.2%, well above TIPS yields of any maturity.
• I Bonds carry many benefits over TIPS, including tax-deferred interest and rock-solid deflation protection.
• Another Savings Bond, the EE Bond, is also very attractive under current terms, offering a 3.5% return for anyone who can hold it 20 years.

I’ve been writing about TIPS and I Bonds for nearly 10 years, and there have few times when I Bonds have reached the level of a SCREAMING BUY. Right now, in March 2020, it’s time to say: “I Bonds are a screaming buy.”

I’ve been pounding the table for I Bonds in recent months, often calling them the best inflation-protected investment in the world. But we’ve now reached a point where I Bonds are amazingly superior to similar very safe investments.

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• The real yield of 0.261% was the lowest for any 29- to 30-year TIPS auction in history, and much lower than the previous record of 0.479%.
• The coupon rate also set a record low of 0.250%, much lower than the previous record of 0.625%.
• Long-term real yields are in a “weird” zone. Beware.

The U.S. Treasury’s auction of a new 30-year Treasury Inflation-Protected Security went off Thursday with a sensational result: A record low real yield of just 0.261%, well below any 29- to to 30-year TIPS auction in history.

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• Investors had to pay a big premium for this TIPS, about $100.86 for $99.97 of value, after the January inflation adjustment.
• The inflation breakeven rate came in at 1.68%, slightly lower than looked likely last week. Still, inflation fears seem to be rising.
• Real yields could continue falling, but an investment at real yields this low is not attractive.

The U.S. Treasury’s auction Thursday of $14 billion in a new 10-year Treasury Inflation-Protected Security generated a real yield to maturity of just 0.036%, the lowest yield on an auction of this term since May 2013.

Read my full analysis on SeekingAlpha.com