U.S. inflation rose 0.2% in June; are days of deflation finally over?

Posted on July 15, 2016 by Tipswatch

Summary

  • The 0.2% number matched the consensus estimate, so no surprise for investors.
  • Non-seasonally adjusted inflation continued a trend of strong increases; it’s up 1.22% over three months.
  • Core inflation is up 2.3% over the last 12 months, certainly not ‘deflationary.’.

As usual, I posted my analysis over at SeekingAlpha.com, so please read it there.

In addition, you can use this link to see the new CPI indexes for all TIPS. June’s inflation numbers set the inflation indexes for August. June’s number continues a series of strong increases in non-seasonally adjusted inflation, which is up 1.22% since March.

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Coming July 21: Auction of a new 10-year TIPS

Posted on July 14, 2016 by Tipswatch

Summary

  • The coupon rate and real yield to maturity for CUSIP 912828S50 will be set by the auction.
  • The current market is pointing to a coupon rate of 0.125% and a real yield of about 0.03%.
  • Why would buyers be interested? TIPS are very cheap when compared to nominal Treasurys.

I just posted my analysis of the July 21 auction over at SeekingAlpha.com.

I don’t think this is going to be an attractive auction for the small investor, but big-money investors are going to be drawn in by currently very low inflation breakeven rate (1.45%) for a 10-year TIPS. That makes TIPS cheap versus nominal Treasurys.

Are you considering an investment? Read my analysis.

Posted in Investing in TIPS | 1 Comment

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.

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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