Treasury Inflation-Protected Securities

• The sharp increase matched the consensus estimate, so it wasn’t a surprise for the markets.
• Core inflation remains muted, increasing just 0.1% for the month and 1.7% over the last 12 months.
• Today’s data won’t alter the Federal Reserve’s course toward higher short-term interest rates. This month’s reopening of a 5-year TIPS is looking attractive.

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

And here are the new January inflation indexes for all TIPS.

• The after-inflation yield was the highest at auction for this term since January 2016, breaking a string of 10 auctions under 0.50%.
• The inflation breakeven rate came in at 1.84%, a reasonable number but well off the lows of early summer.
• Market reaction to the auction has been muted, with the TIP ETF barely budging after the 1 p.m. auction close.

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• Both the headline and core inflation numbers matched the consensus estimates, so no surprises in today’s numbers.
• Non-seasonally adjusted inflation declined slightly in October, which will cause a slight drop in TIPS principal balances in December.
• A December rate increase still looks likely from the Federal Reserve.

Read my full analysis on SeekingAlpha.com

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

And here are the new December inflation indexes for all TIPS.

• The real yield could rise above 0.50% for the first time since January 2016. If that trend holds, should you consider an investment?
• The inflation breakeven rate is currently 1.89%, which is reasonable but puts this TIPS in the neutral zone versus a nominal Treasury.
• How strong will the demand be at Thursday’s auction? Watch the yield trends this week before investing.

Read my full analysis on SeekingAlpha.com