Interesting stuff - the TIPS curve has inverted, the 1-year yield moving from -2.5% to zero in 4...

Interesting stuff - the TIPS curve has inverted, the 1-year yield moving from -2.5% to zero in 4 months, meaning the market is now pricing in 0% inflation over the next year vs. 2.5% just weeks ago. Inflation expectations haven't collapsed like this since 2009. Might this chart be making the rounds with the Fed staff?

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Comments (8)
  • Whitehawk
    , contributor
    Comments (3121) | Send Message
    All this says is that TIPS are a *lousy* deal. The inflation data used to adjust TIPS is not accurate. There are so many other ways to hedge rising prices.
    5 Jun 2012, 05:15 PM Reply Like
  • bbro
    , contributor
    Comments (11234) | Send Message
    Either the world blows up...or those buying bonds in the last month are
    going to get hosed....A 7 year treasury gets you 1.04% a year..while
    carrying a 6.7 Duration risk...15 bps rise wipes out a years worth of interest...
    5 Jun 2012, 05:20 PM Reply Like
  • Tack
    , contributor
    Comments (16513) | Send Message


    It's almost become comical, reading all the dire predictions about huge equity collapses, when almost all the equity holders left town ages ago. But, the hoards are crammed into the Treasury-bond "VW Bus," that gets more packed daily. It's amazing they can breathe.


    All it's going to take is a rather small tire puncture to send that vehicle careening into a ravine with lots of ugly carnage. There might not be a nail on the road around the very next corner, but there's one on the road somewhere, most assuredly.


    Hope they're all enjoying the ride, for now.
    5 Jun 2012, 05:29 PM Reply Like
  • alsobirdman
    , contributor
    Comments (433) | Send Message
    I think that years worth is just about gone already. Amazes me how people will buy a 10-yr T-bill yielding 1.5% and pass on a blue-chip company like KO, CL, PG, etc.
    6 Jun 2012, 09:23 PM Reply Like
  • RS055
    , contributor
    Comments (5671) | Send Message
    Deriving conclusions from things like the TIPS spread would make sense if there was a degree of stability in the treasury market. I believe prices/yields in the treasury market are extremely unstable - could easily jump around. Thats because the Fed isthe main market for treasuries. its a game between the Fed, the Wall Street ealers and the major central banks. it is no longer a market and therefore there is no useful information in the prices.
    5 Jun 2012, 05:32 PM Reply Like
  • traverj
    , contributor
    Comments (2) | Send Message
    Take a look at the chart of the Ishares Barclays TIPS Bond Fund (symbol TIP) especially the weekly chart. A well defined bull move with duration and trending. Has been above the 40 week moving average since early 2011!
    6 Jun 2012, 12:39 AM Reply Like
  • 1mp1r3t4
    , contributor
    Comments (327) | Send Message
    And? Crystal ball anyone?
    6 Jun 2012, 08:49 AM Reply Like
  • clharley
    , contributor
    Comments (16) | Send Message
    I keep paying a premium for OTM puts on a TIP portfolio with big embedded gains and the puts stay OTM.


    An interesting plot is to compare TLT versus TIP over a decade. In a panic, you want to be in TLT . TIP picks trades like a long dated treasury in much of the market but lags TLT when there is a melt down.
    6 Jun 2012, 11:45 PM Reply Like
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