U.S. Inflation Rose 0.2% In February, Matching Expectations

Posted on March 13, 2018 by Tipswatch

Summary

  • Gasoline prices fell 0.9%, which helped to moderate overall inflation. Food prices held steady.
  • Non-seasonally adjusted inflation rose 0.45% in the month, meaning TIPS principal balances will rise 0.45% in April.
  • The February number is the fifth in a six-month period that will determine the I Bond’s new variable rate, to be reset May 1.

Read my full analysis on SeekingAlpha.com

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Inflation Breakeven Rate: What It Really Tells You About TIPS

Posted on March 6, 2018 by Tipswatch

Summary

  • Inflation breakeven rates have been rising fairly steadily since February 2016 and now are in the ‘neutral’ zone of value.
  • When inflation breakevens rise, TIPS outperform nominal Treasurys.
  • The lower the breakeven rate, the higher the ‘margin of safety’ for TIPS investors versus nominal Treasurys.

The inflation breakeven rate is a very accurate measure of the relative value of TIPS versus nominal Treasurys, and a possible predictor of the relative future performance of the two asset classes.

Read my full analysis on SeekingAlpha.com

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30-Year TIPS Auctions With A Real Yield Of 1.003%, Highest In 2 Years

Posted on February 15, 2018 by Tipswatch

Summary

  • The real yield of 1.003% set the coupon rate at 1%, which is favorable for investors.
  • The inflation breakeven rate came in at 2.12%, up 28 basis points from a June 2017 auction of a similar term.
  • The market reaction has been mild; this TIPS generated weaker demand but the yield was close to estimates.

Read my full analysis on SeekingAlpha.com

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U.S. Inflation Jumped 0.5% In January, Higher Than Expected

Posted on February 14, 2018 by Tipswatch

Summary

  • The 0.5% increase in ‘headline’ inflation was well above the 0.3% consensus estimate.
  • Core inflation rose 0.3%, also above the consensus estimate of 0.2%.
  • Non-seasonally adjusted inflation rose 0.54% in January; what does this mean for holders of TIPS and I Bonds?

Read my full analysis on SeekingAlpha.com

Also, I have updated my Inflation and I Bonds page with the new numbers.

And here are the new March Inflation Indexes for all TIPS.

 

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A New 30-Year TIPS? Skip It

Posted on February 9, 2018 by Tipswatch

Summary

  • 30-year real yields have been climbing, but not as quickly as yields for 5- and 10-year TIPS.
  • The inflation breakeven rate is currently a reasonable 2.15%, making this issue competitive with a nominal 30-year Treasury.
  • Risk/reward just isn’t good enough to justify an investment, unless you can be sure of holding it for 30 years.

Read my full analysis on SeekingAlpha.com

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