Why are TIPS bonds only paying about 2⅓% when inflation is at 7.9%?

Discussion in 'Fixed Income' started by kmiklas, Apr 11, 2022.

  1. 9.62% on Ibonds.
    #21     May 2, 2022
  2. piezoe


    You would need to have a yield significantly above the inflation rate for them to be a good investment. They made be a good hedge against inflation, but probably not a good investment.
    #22     May 3, 2022
    kmiklas and murray t turtle like this.
  3. Q.E.D.


    It's 9.6% -- for the next 6 months. Unfortunately, limit to buy 10,000 per person per year.
    #23     May 29, 2022
  4. Q.E.D.


    The 8% inflation rate is a relatively short-term stat: 12 months. Even the rate of change today, is declining, at least partly because of resets -- ie., the initial jump in oil from 50 to 110 is huge, but now the 114 price will start to be compared to say 80 or 100, so the rate of change will show decline

    But TIPS, depending on what instrument, is 5 - 30 years. Apparently few think the current 8% inflation rate will maintain for those periods.
    #24     May 29, 2022
  5. treeman


    TIP is in relation to where-else you can put your money in bonds. The way to look at it is TIP/IEF. IEF is a substitute, based on duration. For me, it shows inflation is alive and well. People are buying TIP at a faster clip than IEF. Looking at just TIP and opining on its price is solving a 2 variable equation with one variable. Price is relative to its substitute.

    pro tip - for HYG, use IEI as the duration substitute.
    #25     Jun 8, 2022