Treasury Inflation-Protected Securities

• The current real yield of 0.34% would fall below results for the last five 9- to 10-year TIPS auctions.
• At that yield, investors would have to pay a slight premium to par value.
• The current inflation breakeven rate of 1.86% is solidly in the neutral range. This TIPS isn’t cheap versus a nominal Treasury.

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• CPI-U increased 0.4% in August, an upside surprise that broke a string of smaller-than-expected numbers.
• Non-seasonally adjusted inflation increased 0.3%, which will boost TIPS principal balances in October and brings the I Bond’s future variable rate up to 1.4%, with one month remaining.
• Social Security benefits at this point would increase 1.7% in January, but there is one month remaining to complete the calculation. The July prediction of a 2.2% increase is still looking unlikely.

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

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

• The after-inflation yield for CUSIP 912828X39 came in right at the expected number, rising 12 basis points since the originating auction on April 20.
• The inflation breakeven rate was 1.66%, which is attractive when measured against nominal Treasurys.
• This TIPS will have one more reopening auction in December. That one will be worth watching.

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• The after-inflation yield is currently running at 0.11%, up from -0.049% at the originating auction in April.
• The inflation breakeven rate is 1.61%, making this TIPS attractive versus a nominal Treasury.
• Key question: Are there better, equally safe shorter-term investments you should consider?

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• Headline inflation rose 0.1% in July, missing the consensus forecast of 0.2% and continuing a trend of downside misses.
• Non-seasonally adjusted CPI-U declined 0.07% in July, which will lower principal balances for TIPS in August and tamper the November 1 variable rate for the I Bond.
• CPI-W, which is used to set Social Security benefits, also fell in July, which makes the Social Security Administration’s projection of a 2.2% benefits increase look faulty.

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

And here are the new TIPS inflation indexes for September.