Treasury Inflation-Protected Securities

• TIPS yields have fallen to their lowest levels in three years.
• The TIP ETF is up about 6.9% year to date, and it has outperformed the overall bond market.
• Thinking you need inflation protection? Consider I Bonds instead of TIPS.

On July 5, the Treasury’s estimated real yield on a full-term 10-year TIPS fell below zero for the first time since April 2015. It closed Wednesday at -0.05%, the lowest estimated yield since June 5, 2013.

Do TIPS still make sense as part of your investment portfolio?

• CUSIP 912810RR1 is going to be pricey and unattractive.
• Federal Reserve didn’t do investors any favors by backing off from rate increases.
• Definitely avoid buying this TIPS in a taxable account; it will be cash flow negative.

I posted an analysis of this reopening on SeekingAlpha.com, read that here.

You can see all my SeekingAlpha posts on this page.

• The May number came in below the consensus estimate of 0.3%, but core inflation rose to 2.2% for the last 12 months.
• Increases in energy and shelter prices were offset by declines in food, apparel, and used cars.
• Non-seasonally adjusted inflation was up 0.41%, continuing a string of strong increases.

I posted an analysis on what this means for TIPS and I Bonds on SeekingAlpha.com, read that here.

I also updated my Tracking Inflation and I Bonds page with the new numbers.

Also, if you’re interested, you can view the new TIPS inflation indexes for July, which are posted here.