BondGuy

Bond Expert: Refunding and Treasury Financing

Actually, TIPS are good for locals, because there is relatively little foreign ownership. That means they will not suffer as much as nominal Treasuries in a dollar crisis, nor are yields unnaturally depressed by SWF safe harbor buying, a serious worry with nominals at this point. As a class, they have performed very well historically. The CPI calculation is a negative, but this is a known problem, and thus, the yield/price reflects the somewhat diminished inflation protection. The biggest problem is liquidity -- these should be buy and hold instruments, held primarily as core holdings in retirement accounts due to the unfavorable tax treatment. They won't make you a millionaire, but if you are one already, they insure that you will stay that way forever, after inflation.