TIPS Vs. Treasuries: The Chart Says It All

Includes: GOVT, TIP, TRSY
by: Brad DeLong

The interest rates on ten-year U.S Treasury inflation-indexed securities (constant-maturity series since its inception, auction-day rates beforehand) and the interest rate on the ten-year nominal Treasury bond, minus the previous year's inflation rate:

FRED Graph  St Louis Fed 4

The conclusion I draw is that nobody was in the business of trying to arbitrage the TIPS rate until the Treasury began publishing its constant-maturity TIPS daily interest rate series. Which is cause and which is effect I leave as an exercise to the reader.