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  • Treasury TIPS: Back in Style [View article]
    Chris B,

    Thanks for a thorough and comprehensive response. You answered well my questions. I also got myself educated from the two links you provided, and I even passed them onto other folks on the Yahoo blogs.

    Teutonic


    On Jan 15 11:00 AM Chris B wrote:

    > Teutonic Knight,
    >
    > Yields for short-term treasuries are close enough to zero that it
    > is accurate to say they are zero, much like my checking account can
    > be said to have a zero interest rate despite paying 0.01% (the same
    > yield as 3 month treasuries were going for last month). The interest
    > can be said to be immaterial at those levels.
    >
    > Longer term bonds such as the 10 year note offer higher rates as
    > usual, 2.18% as of today: finance.yahoo.com/bond... . Could
    > 10-year rates go lower? Technically yes, by 2.18%. In reality,
    > anyone buying a 10-year bond at these expensive levels risks losing
    > value if yields rise, if inflation returns, if the currency devalues,
    > and from opportunity cost. Could 10-year rates go higher? Yes.
    > To double-digits.
    >
    > On your 2nd question, if the economy tanked and inflation increased
    > (a stagflation scenario), the principal would increase by the official
    > rate of inflation - the CPI - and the biannual interest payments,
    > made at a fixed rate, would be based on your rising principal, resulting
    > in those interest payments increasing. www.treasurydirect.gov...

    >
    >
    Jan 15 18:58 pm |Rating: +2 0
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