Treasury Inflation-Protected Securities

• The I Bond’s inflation-adjusted rate will rise slightly on November 1, so there is no pressure to buy before then.
• But could the I Bond’s fixed rate fall from its current 0.3%? The data suggest zero chance, but the Treasury is unpredictable.
• In fact, the data clearly support an increase in the fixed rate to 0.4% and possibly even 0.5%.

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• With a few days to go to Thursday’s auction, this TIPS is trading on the secondary market with a real yield of 1.19%, a two-year high.
• Investors will get this TIPS at a discount, because the after-inflation yield will be higher than the coupon rate of 1.0%.
• Buyers beware: Any 30-year Treasury will be a very volatile investment, especially in a time of rising interest rates and rising federal deficits.

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• September inflation rose 0.1%, under the consensus estimate. Annual inflation fell to 2.3%, also under estimates.
• Today’s inflation report means the Social Security COLA will increase 2.8% for 2019, the highest increase since 2012.
• The data also set the I Bond’s inflation-adjusted variable rate at 2.32%, slightly higher than the current 2.22%.

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

And view my Social Security COLA page for these updated numbers.

And here the new November Inflation Indexes for all TIPS.

• Bank CD rates are finally climbing toward reasonable levels. How long has it been since we have seen 3% for a 3-year term?
• But across most short-term maturities, U.S. Treasurys offer better yields, ultimate safety and freedom from state income taxes.
• Bond funds are taking a hit as rates rise. Investing in U.S. Treasurys with a buy-and-hold strategy is a safer way to respond to rising risk.

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• The real yield of 0.910% was the second highest of this term through 43 auctions since May 2011.
• The inflation breakeven rate came in at 2.15%, on the higher end of recent auctions, but still acceptably in the “neutral zone.”
• Investors got an attractive yield, a good coupon rate of 0.750%, and a decent price versus nominal Treasurys.

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