TIPS yields go negative to inflation – what’s the best move now?

Posted on July 8, 2016 by Tipswatch

Summary

  • 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?

Read my analysis at SeekingAlpha.com

Posted in Investing in TIPS | 1 Comment

On a rare Wednesday auction, 30-year TIPS reopening goes off with a real yield of 0.905%

Posted on June 23, 2016 by Tipswatch

Hmmm… a TIPS auction on a Wednesday? I have to admit, I didn’t see that coming. I have been covering TIPS auctions for 5 1/2 years, and every single one was on a Thursday, unless the Thursday was a federal holiday.

I searched for a reason for the one-day leap forward, but couldn’t find one. Maybe the Treasury wanted to step aside during Great Britain’s Brexit vote. Maybe the Treasury has summer vacation plans. I saw today that Republicans in the US House voted to start their July 4th holiday today. Ah, the life …

At any rate, the Treasury’s auction Wednesday of a reopening of CUSIP 912810RR1 – creating a 29-year, 8-month TIPS – resulted in a real yield to maturity of 0.905%. (Real yield is the yield above inflation.)

I posted an analysis at SeekingAlpha.com, please read it there.

You can read all my recent articles on my profile page.

Posted in Investing in TIPS | Leave a comment

Up next: A particularly ugly reopening auction for a 30-year TIPS

Posted on June 16, 2016 by Tipswatch

Summary

  • 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.

Posted in Investing in TIPS | 3 Comments

U.S. inflation rose 0.2% in May – a lower number than expected

Posted on June 16, 2016 by Tipswatch

Summary

  • 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.

Posted in Investing in TIPS | Leave a comment

10-Year TIPS reopening auctions with a real yield of 0.275%

Posted on May 19, 2016 by Tipswatch
  • The after-inflation yield was the lowest for any 9- to 10-year TIPS in more than a year.
  • This TIPS has a coupon rate of 0.625%, so buyers paid an adjusted price of about $103.53 for $100 of par value.
  • The 10-year inflation breakeven rate came in at 1.56% – pretty attractive for a 10-year TIPS.

The yield for CUSIP 912828N71 ended up being more than 10 basis points higher than where this TIPS was trading two days ago. So buyers got a higher yield and Treasury got to sell a 9- to 10-year TIPS at the lowest yield in more than a year. Everyone happy?

Read my analysis at SeekingAlpha.com

Posted in Investing in TIPS | 1 Comment