Let’s take the long view on real yields

Posted on June 23, 2025 by Tipswatch

By David Enna, Tipswatch.com

I noticed this morning that real yields for Treasury Inflation-Protected Securities are shifting a bit in the wake of the U.S. attack on Iran. But so far these changes seem fairly routine.

  • The 5-year TIPS is trading this morning with a real yield of 1.54%, down from 1.59% at Friday’s close.
  • The 10-year is at 1.99%, down from 2.05% on Friday.
  • The 20-year is at 2.52%, up from 2.41% on Friday.
  • The 30-year is at 2.57%, down from 2.59%.

The yield curve has been steeping throughout 2025 based on a couple of factors: 1) the shorter end (5 years or fewer) is more influenced by potential Federal Reserve cuts in short term rates later this year, and 2) the longer end reflects the high uncertainty about future U.S. budget deficits.

The 20-year TIPS is often an anomaly; the same goes for the 20-year Treasury bond, which often has a nominal yield higher than the 30-year bond. For many investors nearing or at retirement, the 20-year term is attractive because the term (hopefully) matches life expectancy.

Across the board, however, these real yields remain attractive. Could you call them historically “normal”? I’d say no, based on data from the last 22 years. The Federal Reserve of St. Louis compiles real yield data going back to 2003. A few years before that, toward the end of the dot-com bubble, real yields were extremely high, often reaching levels well above 3.00%. But the FRED (Federal Reserve Economic Data) database only goes back to 2003.

What is ‘real yield’?

Simply put, the real yield of a TIPS is the amount it will earn above official U.S. inflation over the term of the TIPS. If a 10-year TIPS has a real yield of 2.00%, and inflation averages 2.5% over the next 10 years, that TIPS will have a nominal return of 4.50% (give or take a slight variation because of compounding).

It’s not a difficult concept, right? But I once did a long interview with a Wall Street Journal freelancer writing an article on TIPS for a special section. He could not grasp the idea of real yield or how an investment could be pegged to something in the future. He decided to write this big piece without ever mentioning the term “real yield.”

I told him his editor would never allow it. His editor did allow it.

As regular readers of this site know, real yield is extremely important to investors in TIPS. In fact, it is the primary factor worth considering when buying on the secondary market.

So let’s look at real yields over the last 22 years.

5-year TIPS

Click on image for larger version.

Today’s 5-year real yield of 1.54% is in the high range when compared with the last 16 years, but fairly normal for the period of 2003 to 2007, just before the onset of the Great Recession. Notice the spike in real yields during that recession and also during the Covid crisis. Both of these were caused by panic selling of all assets, not from true economic reasons.

The 5-year real yield is nearly 100 basis points below its most-recent high of 2.51% in October 2023. But in my opinion it remains attractive, given its short term and solid safety.

10-year TIPS

Click on image for larger version.

The pattern here is similar to the 5-year. Real yields are very high today compared with the last 16 years, but fairly normal for the time before the Great Recession. The 10-year TIPS is a good benchmark, and a 2% real yield meets historical expectations for a Treasury investment. Even though real yields could continue rising, today’s yield levels are highly attractive.

20-year TIPS

Click on image for larger version.

For some reason FRED’s data only goes back to August 2004 for the 20 year TIPS. This term was issued at auction by the Treasury from 2004 to 2009, but those ended in January 2009, unfortunately. That’s the reason we have no TIPS maturing in the years of 2036 to 2039.

Today’s real yield of 2.40%+ is very close to the high over the 21-year period shown in the chart. This term is only available on the secondary market, often with high inflation accruals. For that reason, TIPS in the 20-year range are often shunned by investors. I am a fan of this weird term and its attractive real yields, but my TIPS ladder ends in 2043, when I will be 90 years old.

It is worth snooping around the secondary market for attractive TIPS maturing from 2040 to 2045, if you can handle purchasing the accrued principal above par value. Real yields are in the range of 2.25% to 2.53%.

See more: TIPS on the secondary market: Things to consider

30-year TIPS

Click on image for larger version.

For the 30-year TIPS, FRED data go back only to 2010, because the U.S. Treasury stopped issuing this 30-year term from October 2001 to February 2010. Again, this is the reason for the gap years in TIPS maturities. As you can see in this chart, the 30-year real yield is close to the high for the last 15 years.

Again, getting a real yield well above 2.0% is historically attractive. A 30-year TIPS is a highly volatile investment, but a good one for investors who know they can hold to maturity and ride out the fluctuations. In 2055 I would be 102 years old. I won’t make it.

Thoughts

Real yields have been on the move for much of 2025, but remain historically attractive through the yield spectrum, especially for terms of 10 to 10+ years. There is a lot of uncertainty right now, both for inflation and future budget deficits. I’d expect the volatility to continue.

• Now is an ideal time to build a TIPS ladder

• Confused by TIPS? Read my Q&A on TIPS

• TIPS in depth: Understand the language

• TIPS on the secondary market: Things to consider

• TIPS investor: Don’t over-think the threat of deflation

• Upcoming schedule of TIPS auctions

* * *

Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear. Please stay on topic and avoid political tirades. NOTE: Comment threads can only be three responses deep. If you see that you cannot respond, create a new comment and reference the topic.

David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.

Posted in Federal Reserve, Inflation, Investing in TIPS, TreasuryDirect | Tagged , , , , , , | 12 Comments

5-year TIPS reopening auction gets real yield of 1.650% to good demand

Posted on June 17, 2025 by Tipswatch

By David Enna, Tipswatch.com

The Treasury’s offering of $23 billion in a reopened 5-year Treasury Inflation-Protected Security – CUSIP 91282CNB3 – generated a real yield to maturity of 1.650%, close to what the market expected.

This TIPS was trading on the secondary market Tuesday morning with a real yield in the range of 1.63% to 1.65%. The auction generated a solid bid-to-cover ratio of 2.53 and the yield dipped slightly below the “when-issued” prediction of 1.66%. So demand was solid.

This version of CUSIP 91282CNB3 creates a 4-year, 10 month TIPS. It had its originating auction on April 17, when the real yield to maturity was a bit higher at 1.702%. The coupon rate was set at 1.625%.

Definition: The “real yield to maturity” of a TIPS is its yield above official future U.S. inflation, over the term of the TIPS. So a real yield of 1.65% means an investment in this TIPS would provide a return that exceeds U.S. inflation by 1.65% for 4 years, 10 months.

The 5-year real yield has been climbing recently as the bond market adapts to future Treasury borrowing needs. But the 5-year real yield has fallen a remarkable 90 basis points since its recent high in October 2023. Here is the trend in the 5-year real yield over the last two years:

Click on image for larger version.

Demand for this auction had raised some concern in recent days. From a MarketWatch report posted before the close:

Barclays rates analysts pointed to today’s $23 billion auction of 5-year Treasury Inflation-Protected Securities, or TIPS, as a potential source of concern for markets, given that the last three auctions of this type “tailed,” a sign of weaker demand.

A tail means investors demanded more yield at an auction than similar outstanding securities were being priced at in the open market.

The Barclays rates team, led by Jonathan Hill, said there also have been preliminary signs of a drop in TIPS allocations to foreign accounts.

Instead, the auction appeared to be met with good demand, with the real yield dipping slightly below the “when-issued” prediction.

Pricing

Because the real yield of 1.650% was slightly above the coupon rate of 1.625%, this TIPS auctioned at a small discount, with an unadjusted price of 99.883628. In addition, it will carry an inflation index of 1.00764 on the settlement date of April 30. With that information, we can calculate the exact cost of a $10,000 par value purchase at today’s auction:

  • Par value: $10,000.
  • Actual principal purchased: $10,000 x 1.00764 = $10,076.40
  • Cost of investment: $10,076.40 x 0.99883628 = $10,064.67
  • + accrued interest of $34

In summary, an investor placing an order for $10,000 par value paid $10,064.67 for $10,076.40 of principal on the closing date of April 30. From then on, the investor will receive inflation adjustments to principal plus an annual coupon rate of 1.625% (paid on inflation-adjusted principal) until maturity. The accrued interest will be returned at the first coupon payment on Oct. 15.

Inflation breakeven rate

With the 5-year Treasury note trading at a nominal yield of 4.00% at the auction’s close, this TIPS gets an inflation breakeven rate of 2.35%, up slightly from recent auctions of this term. This means the TIPS will outperform a nominal Treasury if inflation averages more than 2.35% over the next 4 years, 10 months.

While 2.35% is a historically high breakeven rate, it seems reasonable in this new era of potentially higher inflation. Inflation over the last 5 years, ending in May, has averaged 4.6%. Here is the trend in the 5-year inflation breakeven rate over the last two years:

Thoughts

This auction seemed to go off without a hitch to strong investor demand, creating a slightly lower real yield than predicted. The real yield of 1.65% was well below recent auction highs of 2.242% (April 18, 2024) and 2.440% (Oct. 19, 2023), but remains attractive for the 5-year term.

It does not appear that the explosive Israel-Iran conflict has had a great effect on Treasury markets, as of yet. In other words, there’s been no flight to safety in U.S. Treasury investments. Meanwhile, the price of gold is up 4.7% over the last month. The value of the U.S. dollar is down 1.5% over the same period.

A declining dollar and potentially much higher oil prices (up 17% in one month) could trigger rising inflation in the United States, so an investment in inflation-protected investments looks like a wise choice. Investors in today’s auction aren’t going to get rich, but they could get some peace of mind.

Here are the results of 4- to 5-year TIPS auctions over the last five years, including the pathetically miserable auction of Oct. 21, 2021, with a real yield to maturity of -1.685%:

• Now is an ideal time to build a TIPS ladder

• Confused by TIPS? Read my Q&A on TIPS

• TIPS in depth: Understand the language

• TIPS on the secondary market: Things to consider

• TIPS investor: Don’t over-think the threat of deflation

• Upcoming schedule of TIPS auctions

* * *

Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear. Please stay on topic and avoid political tirades. NOTE: Comment threads can only be three responses deep. If you see that you cannot respond, create a new comment and reference the topic.

David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.

Posted in Inflation, Investing in TIPS, TreasuryDirect | Tagged , , , , , , , | 6 Comments

Coming Tuesday: Reopening auction of a 5-year TIPS

Posted on June 14, 2025 by Tipswatch

By David Enna, Tipswatch.com

Yes, Tuesday. This month, the U.S. Treasury is breaking from its tradition of holding auctions for Treasury Inflation-Protected Securities on a Thursday. This month, it will be Tuesday, June 17.

Why? Well, you could ask Google’s AI bot and you would learn it has no idea:

According to TreasuryDirect, the U.S. Treasury’s website, 5-year TIPS are generally auctioned on the next to last Thursday of April and October, and reopenings are typically auctioned in June and December.  However, the specific date of June 17th being a Tuesday for a 5-year TIPS auction would indicate a deviation from the standard schedule.

Really? That wasn’t helpful. Let’s try Microsoft’s version of Chat GPT:

The shift in the auction date is likely due to scheduling adjustments based on Treasury borrowing needs, policy decisions, or holiday considerations.

OK, also not helpful. So let’s ask Dave, the human editor of Tipswatch.com:

Thursday, June 19, is Juneteenth, a federal holiday that commemorates the end of slavery in the United States. On June 19, 1865, Gen. Gordon Granger ordered the final enforcement of the Emancipation Proclamation. Because June 19 is a federal holiday, the TIPS auction was moved to Tuesday, June 17.

The auction

The Treasury will offer $23 billion in a reopening auction of CUSIP 91282CNB3, creating a 4-year, 10-month TIPS. This TIPS was originated on April 17, 2025, when the auction generated a real yield to maturity of 1.702%. Its coupon rate was set at 1.625%.

For anyone who cares, $23 billion is the largest offering for any 5-year TIPS reopening auction in the 28-year history of this investment, up from $22 billion in December 2024.

CUSIP 91282CNB3 trades on the secondary market, and it closed Friday with a real yield of 1.68% and a price of 99.77. That’s a very small discount because the real yield remains slightly higher than the coupon rate. You can track this TIPS in real time on Bloomberg’s Current Yields page. It is the 5-year TIPS listed there.

Friday was a day of fairly strong market volatility in the wake of Israel’s attack on Iran’s nuclear-processing facilities. But the real yield of this TIPS inched just a bit higher. Next week could bring chaos. Or stability. Be prepared.

Definition: The “real yield to maturity” of a TIPS is its yield above or below official future U.S. inflation, over the term of the TIPS. So a real yield of 1.68% means an investment in this TIPS would provide a return that exceeds U.S. inflation by 1.68% for 4 years, 10 months.

Here is the trend in the 5-year real yield over the last 15 years, showing the recent decline in yields, most likely caused by anticipation of future Federal Reserve cuts in short-term rates. But a 5-year real yield of 1.68% remains attractive, historically:

Of the monthly TIPS auctions, the 5-year is the most sensitive to Fed rate decisions. The Federal Reserve’s open market committee is scheduled to announce a rate decision on Wednesday, the day after this auction. It is highly unlikely to announce a rate cut on that day. But it could provide future guidance. Too late to matter for this auction.

If we see volatility over the next two days, it will likely come from dangers in the Middle East, not the Fed.

Pricing

At this point, it looks like the reopening auction should be priced close to par value. The current trading price is 99.77 and this TIPS will have an inflation index of 1.00764 on the settlement date of June 30. If the price holds (it won’t, but let’s use it as an example), this is what a purchase of $10,000 par value will look like at Tuesday’s auction:

  • Par value: $10,000.
  • Actual principal purchased: $10,000 x 1.00764 =$10,076.40.
  • Cost of investment: $10,076.40 x 0.9977 = 10,053.22.
  • + accrued interest of about $34.

Things will change by Tuesday’s auction, but this can give you a pretty good idea. You can also buy CUSIP 91282CNB3 on the secondary market before the auction, or after.

The advantage of buying at auction, especially through TreasuryDirect, is that even small-lot purchases will get the auction’s high yield. The advantage of the secondary market is that you can see exactly the price and real yield you will be receiving. The negative is that you may face a small bid-ask spread. Most of the time, it doesn’t make a huge difference.

Inflation breakeven rate

The 5-year Treasury note closed Friday with a nominal yield of 4.00%, which gives CUSIP 91282CNB3 a current inflation breakeven rate of 2.32%, more or less in line with recent auction results for this term. This means the TIPS will outperform a nominal Treasury if inflation averages more than 2.32% over the next 4 years, 10 months. Inflation over the last 5 years ending in May has averaged 4.6%.

Here is the trend in the 5-year inflation breakeven rate over the last 15 years, showing the decline in inflation expectations since a peak in early 2022:

Thoughts

The Treasury market has returned to some “normalcy” with shorter-term TIPS having lower real yields than those for longer terms. The 5-year real yield of 1.68% is 95 basis points lower than the yield of a 30-year TIPS at 2.63%. That makes sense given the uncertainty surrounding future U.S. budget deficits.

I won’t be a buyer Tuesday because I have filled the 2030 rung of my TIPS ladder with issues I purchased at lower real yields (1.432%) and higher (2.009%).

If you are considering a purchase at this auction, keep an eye on Bloomberg’s Current Yields page, where you can track secondary market trading in real time. That should be a good — but not perfect — indication of where this auction is heading.

The TIPS auction closes Tuesday at 1 p.m. EST. Non-competitive bids at TreasuryDirect must be placed by noon Tuesday. If you are putting an order in through a brokerage, make sure to place your order Monday or very early Tuesday, because brokers cut off auction orders before the noon deadline.

I will be posting the auction results soon after the close on Tuesday. Here is a history of auction results for this term over the last 5 years:

• Now is an ideal time to build a TIPS ladder

• Confused by TIPS? Read my Q&A on TIPS

• TIPS in depth: Understand the language

• TIPS on the secondary market: Things to consider

• TIPS investor: Don’t over-think the threat of deflation

• Upcoming schedule of TIPS auctions

* * *

Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear. Please stay on topic and avoid political tirades. NOTE: Comment threads can only be three responses deep. If you see that you cannot respond, create a new comment and reference the topic.

David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.

Posted in Federal Reserve, Inflation, Investing in TIPS, TreasuryDirect | Tagged , , , , , | 13 Comments

U.S. annual inflation ticked higher in May, but below expectations

Posted on June 11, 2025 by Tipswatch

By David Enna, Tipswatch.com

U.S. inflation continued rising at a moderate rate in May, with all-items prices increasing only 0.1% on a seasonally adjusted basis, the Bureau of Labor Statistics reported today. The annual inflation rate for May increased to 2.4%, up from 2.3% in April.

Core inflation, which strips out food and energy, also increased 0.1% and at an annual rate of 2.8%, down from 2.9% for April. All of these results were below economist expectations and should be viewed positively today by financial markets.

May’s result continues a recent string of lower-than-expected inflation reports.

The BLS said shelter costs rose 0.3% in May and were the primary factor in the all-items and core inflation increases. Shelter costs were up 3.9% year over year. Here are other notable items from the report:

  • The cost of food at home increased 0.3% for the month and 2.2% year over year.
  • Gasoline prices fell 2.6% for the month and are down 12.0% for the year.
  • Apparel costs — which could be affected by tariffs in the near future — fell 0.4% for the month.
  • Prices for new vehicles fell 0.3% for the month and are up only 0.4% year over year.
  • Costs for used cars and trucks also fell 0.5% for the month.
  • The cost of motor vehicle insurance rose 0.7% in May and was up 7.0% year over year.
  • Airline fares fell 2.7% in May and 7.3% over the last year.

Overall, U.S. prices seems to be showing little effect from U.S. tariffs, which began rolling into effect in May. Overall inflation appears to be being held down, at the moment, by declining gasoline prices and held higher by increasing shelter costs.

Here is the one-year trend in annual all-items and core inflation, showing the relatively stable pattern over the last three months:

What this means for TIPS and I Bonds

Investors in Treasury Inflation-Protected Securities and U.S. Series I Savings Bonds are also interested in non-seasonally adjusted inflation, which is used to adjust principal balances on TIPS and set future interest rates for I Bonds. For May, the BLS set the CPI-U inflation index at 321.465, an increase of 0.21% over the April number.

For TIPS. Based on the May inflation number, principal balances for all TIPS will increase 0.21% in July, after increasing 0.31% in April. For the year ending in July, principal balances will have increased 2.4%. Here are the new July inflation indexes for all TIPS.

For I Bonds. The May inflation report is the second in a six-month string that will determine the I Bond’s new variable rate, which will be reset on November 1 based on inflation for April through September. Two months in, inflation has increased 0.52%, which translates to a variable rate of 1.04%. It’s too early to draw any conclusions from that. Here are the data:

See historical data on my Inflation and I Bonds page.

What this means for future interest rates

The current string of moderately low inflation reports should be clearing the way for future cuts in short-term interest rates by the Federal Reserve. But the overhanging uncertainty about tariffs is a roadblock to any Fed decision.

Bloomberg’s headline this morning is: “Cool US CPI Boosts Bets on Two Fed Rate Cuts by Year-End.” I’d say we were probably heading that way anyway, and today’s inflation report solidifies that trend. But inflation traders still see inflation picking up later this year to around 3.2%.

Inflation expert Michael Ashton posted this analysis this morning:

While we haven’t seen a major impact from tariffs yet, and my view is that it won’t be a huge impact in any case except for particular items, I am pretty sure we will see something and median and core inflation will see acceleration over the balance of this year and into next year.

Uncertainty remains. While we may see cuts in short-term rates later this year, longer-term Treasury rates could continue rising as the U.S. heads toward higher future deficits and higher borrowing. We are going to see a lot of “crisis talk” in coming weeks as we march toward a massive tax bill and debt-ceiling limit.

* * *

Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear. Please stay on topic and avoid political tirades. NOTE: Comment threads can only be three responses deep. If you see that you cannot respond, create a new comment and reference the topic.

David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.

Posted in Federal Reserve, I Bond, Inflation, Investing in TIPS | Tagged , , , | 18 Comments

Inflation data collection is getting scaled back: What does it mean?

Posted on June 5, 2025 by Tipswatch

By David Enna, Tipswatch.com

The Bureau of Labor Statistics, which compiles and publishes monthly U.S. inflation reports, posted a cryptic announcement this week noting it was scaling back collection of data on prices.

BLS is reducing sample in areas across the country. In April, BLS suspended CPI data collection entirely in Lincoln, NE, and Provo, UT. In June, BLS suspended collection entirely in Buffalo, NY.  

Sample reduction and collection suspension affect both the commodity and services survey and the housing survey. These actions have minimal impact on the overall all-items CPI-U index, but they may increase the volatility of subnational or item-specific indexes. The number of imputed items and the response rates increased in April due to these actions. BLS makes reductions when current resources can no longer support the collection effort. BLS will continue to evaluate survey operations.  

The cutbacks are a reaction to staffing shortages after deep job cuts earlier this year in the Labor Department and other U.S. agencies. The BLS acknowledged a “staffing shortage” in an email sent to economists, the Associated Press reported.

These cuts and others have raised alarms that U.S. economic reports could be sliding toward inaccuracy or be otherwise compromised. The AP noted:

The cutbacks have intensified worries among economists that government spending cuts could degrade the federal government’s ability to compile key economic data on employment, prices, and the broader economy. The BLS also said last month that it will no longer collect wholesale prices in about 350 categories for its Producer Price Index, a measure of price changes before they reach the consumer. …

“The PPI is cutting hundreds of indexes from production, and the CPI is now being constructed with less data,” Omair Sharif, chief economist at the consulting firm Inflation Insights, said in an email. “That alone is worrying given that we’re heading into the teeth of the tariff impact on prices.”

The BLS, however, said the cuts would have “minimal impact” on overall inflation data, while noting volatility could increase for some items and regions.

What does it mean?

At this point, the move appears to be a reaction to staffing cuts and not an attempt to “cook” the U.S. inflation numbers, as some people have feared. Erica Groshen, a former commissioner of BLS, told the AP the agency has lost about 15% of its personnel since the beginning of the year.

But that doesn’t mean we shouldn’t be wary. Earlier this year, the Trump administration disbanded the Federal Economic Statistics Advisory Committee, which worked with BLS on fine-tuning data-gathering. The latest calendar item for the FESAC, dated June 13, says: “Meeting Canceled.”

That was an odd move at a time of staffing cuts. Members of the FESAC, which was chartered to continue through September 2026, essentially worked for free, receiving only travel expenses. The agency’s total annual budget was about $120,000 for five staff people.

Don’t panic. Yet.

From Wall Street Journal coverage yesterday:

Economists say the staffing shortage raises questions about the quality of recent and coming inflation reports. There is no sign of an intentional effort to publish false or misleading statistics. But any problems with the data could have major implications for the economy. …

If the government’s enumerators can’t track down a specific price in a given city, they try to make an educated guess based on a close substitute: say, cargo pants instead of slacks. But in April, with fewer workers on hand to check prices, statisticians had to base their guesses on less comparable products or other regions of the country—a process called different-cell imputation—much more often than usual, according to the BLS.

The WSJ article included a chart showing the large spike in “estimation” used in the April inflation report. (Remember, estimation is just a fancy word for educated guessing.)

Michael Ashton, an inflation expert who founded the firm Enduring Investments, posted on X a non-alarmist reaction to the BLS announcement:

So, without any evidence to the contrary, I will accept that the U.S. inflation numbers will continue to be “relatively accurate,” which is about as good as they ever were. But we have to accept that budget and staffing cuts at the BLS are going to lead to less accuracy, not more accuracy.

Accuracy, while not perfectly attainable, should be the ultimate goal. These U.S. inflation reports are hugely important because they lead to:

  • Cost of living adjustments for Social Security recipients.
  • Federal Reserve decisions on future interest rates.
  • Interest rate changes for Series I Savings Bonds.
  • Principal adjustments for Treasury Inflation-Protected Securities.
  • Wage increases under some union contracts.

Be aware. Or to put it another way: “Beware.”

* * *

Follow Tipswatch on X for updates on daily Treasury auctions and real yield trends (when I am not traveling).

Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear. Please stay on topic and avoid political tirades. NOTE: Comment threads can only be three responses deep. If you see that you cannot respond, create a new comment and reference the topic.

David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.

Posted in Federal Reserve, I Bond, Inflation, Investing in TIPS | Tagged | 38 Comments