After A Surreal Surge, This 10-Year TIPS Is Now Depressingly Normal

May 19, 2020 2:53 PM ETTIP, TLT7 Comments
Tipswatch profile picture


  • The Treasury will reopen a 10-year TIPS at auction on Thursday, with the real yield to maturity expected to be well below zero.
  • This TIPS -- CUSIP 912828Z37 -- had an amazing reopening auction in March, just as Treasury yields were surging.
  • It's not an attractive investment for small-scale investors, but the inflation breakeven rate of about 1.18% will make it appealing to big-money investors.

The U.S. Treasury will offer $12 billion in a reopened 10-year Treasury Inflation-Protected Security -- CUSIP 912828Z37 -- at auction Thursday, in an event that will reveal just how depressing the TIPS market has become.

This TIPS originated at auction on January 23 with a real yield to maturity of 0.036%, barely positive to inflation, and a coupon rate of 0.125%, the lowest the Treasury will go on a TIPS. That was the lowest real yield for any 9- to 10-year TIPS auction since May 2013.

That was January ... a lifetime ago.

Then CUSIP 912828Z37 had a reopening auction on March 19, right in the middle of a three-day span of incredible volatility in the U.S. Treasury market. Investors were dumping everything -- equities, bonds, gold.

  • The S&P 500 index hit 2,237.4 on March 23, its low for the year. It's now at 2,953.9, an increase of 32%.
  • The TIP ETF hit $108.31 on March 18, its low for the year. It's now at $121.54, an increase of 12.2%.
  • TLT, the long-term Treasury ETF, hit $147.87 on March 19. It's now at $163.05, an increase of 10.3%.

Amid this turmoil, CUSIP 912828Z37 had a reopening auction with an amazing result: a real yield to maturity of 0.68%, at least 60 basis points higher than looked likely three days earlier. I called that a "gorgeous result" for investors, who nabbed this TIPS at a big discount: about $94.99 for about $100.26 of value.

Four days after that eventful auction, the Federal Reserve stepped in with a massive effort to stabilize the entire bond market, sending yields for nominal Treasurys and TIPS plummeting within a week.

What to expect Thursday

And now, two months later, the TIPS market has returned to what we call "depressingly normal" during times of economic distress and Federal Reserve

This article was written by

Tipswatch profile picture
I am no longer writing for this site. More details. I will continue to post updates at my site, Enna is a long-time journalist based in Charlotte, N.C. A past recipient of two Society of American Business Editors and Writers awards, he has written on real estate and home finance, and was a founding editor of The Charlotte Observer's website. The Tipswatch blog, which launched in April 2011, explores ideas, benefits and cautions about U.S. Series I Bonds and Treasury Inflation-Protected Securities, which David believes are an under-appreciated and under-used investments. David has been investing in TIPS and I Bonds since 1998.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. The investments he recommends can purchased through the Treasury or other providers without fees, commissions or carrying charges.

Recommended For You

Comments (7)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.