New 5-Year TIPS Auction Is Suddenly Looking Like A Loser

Posted on April 17, 2017 by Tipswatch

Summary

  • Real yields have declined sharply in recent days, dropping the 5-year yield to 0.03%.
  • When the 5-year TIPS yield approaches zero, I Bonds and bank CDs become attractive alternatives.
  • Inflation expectations have been declining over the last month, even as demand for TIPS rises.

The U.S. Treasury on April 20 will auction $16 billion in a new 5-year Treasury Inflation-Protected Security (CUSIP 912828X39). The coupon rate and real yield to maturity (after inflation) will be determined at the close of the auction.

Read my full analysis on SeekingAlpha.com

Posted in Investing in TIPS | 3 Comments

Inflation Dips In March, I Bond’s Variable Rate Will Fall To 1.96% On May 1

Posted on April 14, 2017 by Tipswatch

Summary

  • At the May 1 reset, the I Bond’s variable rate will fall from 2.76% to 1.96%.
  • We don’t know yet what the new fixed rate will be. Will it rise to 0.1%? Still possible.
  • Should you buy I Bonds before May 1 to get the higher variable rate? Or hold out for the higher fixed rate? Tough call.

This decline in the variable rate sets up an interesting decision for I Bond investors: Buy before May 1 to get the 2.76% variable rate for six months, or wait until May 1 to see if the I Bond’s fixed rate – currently set at 0.0% – will rise to 0.1% (or higher).

>>Read my full analysis on SeekingAlpha.com

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

And here are the May CPI indexes for TIPS.

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I Bond Investors: April May Be Your ‘Decision Month’

Posted on April 3, 2017 by Tipswatch

Summary

  • Inflation report on April 14 will set the I Bond’s six-month variable rate, taking effect May 1.
  • Right now, it looks like the new six-month variable rate could be lower than the current 2.76%.
  • However, it’s possible the May 1 fixed rate – which stays with the I Bond forever – will rise above the current 0.0%.

The idea with I Bonds is to build a large inflation-protected cache, as part of an overall portfolio that includes stocks, bonds, nominal Treasurys, TIPS, bank CDs, mutual funds. The difficulty is that there is a $10,000 per person per year purchase limit on I Bonds, so to build a large stockpile you have to buy them every year. And then the question is: When do you make the purchase?

Read my full analysis on SeekingAlpha.com

Posted in Investing in TIPS | 1 Comment

10-Year TIPS Reopening Auctions With A Real Yield Of 0.466%

Posted on March 23, 2017 by Tipswatch

Summary

  • 10-year TIPS yields have been holding under 0.50% even as the Federal Reserve raises short-term rates.
  • The inflation breakeven rate dipped to 1.95%, under the 2.00% mark where it had been riding for most of 2017. Inflation expectations are stable right now.
  • Buyers at today’s reopening got this TIPS at a slight discount and a slightly higher yield than at the originating auction in January.

Read my full analysis at SeekingAlpha.com

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10-year TIPS will reopen at auction March 23; will yield be high enough to be attractive?

Posted on March 16, 2017 by Tipswatch

Summary

  • A week out, CUSIP 912828V49 is trading with a real yield to maturity of 0.48%.
  • Its inflation-breakeven rate is 2.04%, right in the mid-range of inflation expectations since 2009.
  • Is it a buy? Maybe not at the current yield, but watch for volatility next week.

Read my full analysis at SeekingAlpha.com

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