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4.5 Year TIPS Auction Closes At -0.55%, First Ever Negative Yield
As we reported some time ago, the weird stuff in TIPS land continues, and was brought to the surface during today's 4 Year 6 Month TIPS auction, which closed at, drumroll, -0.55%. That's right, a yield of negative 0.55%. This compares to +0.55% in April. TIPS Investors better hope that the CPI eventually captures all the fun that is happening in the Rare Minerals space.
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Everybody here is calling for a crash in the market . Ben will avoid it at all costs . If it costs 7 trillion he will introduce $7 trillion . If Ben miscalculates it will be not to far under what the market is expecting and the market might tank temporarily and regain its losses quickly . Tips will be a winner .
The one thing that will tank tips is no QE or a figure in the billions which would be considered way to small by todays infinitehedgers .
I don't think the market is going to come down with the new QE I think the result will be a ramp like one never seen but I also believe everything is going to ramp except home prices and gadgets that people can't eat . This is going to be one fucked up ride .
the only things that will blow up the trade is if interest rates go higher, and inflation does not. since China and the US both run inflation ahead of interest rates, that would require a major market turn of some sort. however if you buy the short term fund and you own the long term paper, you are hedged (sort of) because the fund will track the current rates
This is why I have been only rolling over 28-day bills, and stopped doing that 2 months ago. I have bought some I-bonds early in the year, and it looks like on November 1 the interest rates on those are going to be Zero and the fixed rate will probably match that. But at least it can't go below ZERO on the I-bond. I would hate to be the buyer of a 5yr TIPS at a negative yield and the FED holds rates flat for 5 years. You will be paying them to borrow your money all that time, WTF is wrong with this picture? It tells me things are worse than they are telling people. Stock market is clearly overvalued by some 15-20% based on this event, no matter what kind of QE they do.
It's a sick charade. Just like Timmy going in front of the G20 and lecturing the world about not manipulating currency markets. It would be funny if it wasn't the American way of life circling the drain, but it is.
do i read this right? Does that mean that people would pay $1005.50 for a bond with a face value of $1000?
Who owns the issue and will they sell to the Fed at the next POMO??
Kansas on a clear day WhoT!
Just wait until the 4 week - 2 year follows suit into the you get to pay me to play me arena. 2D love from Ben & Janet
Everybody in the Club Getting Tip-sy!
http://www.youtube.com/watch?v=zGUwafCcL2M
Classics simply are reflections of being human .. most esp with the 'ississ' errrbodddy original. Even from them damn yankees up there in StL (even if that is the North Side of town) :) And another quality look at the fuckyou'dness we've all come to love, and recognize as most of us never have played well with others
http://www.youtube.com/watch?v=yg6FxDHxeKM
Reminds me what all this happy crappy really is... esp from that 2D world of Wall Street. From the good chefs at Chez Shalom to your table....
http://www.youtube.com/watch?v=PW8NIkOOeS8
We can only look on in wonder as more and more realize where we are and what kind of high wire we need to traverse. The visuals and harmonics courtesy of more 'ississ' magic. Thanks for showing me how it's really done champ
http://www.youtube.com/watch?v=Yd60nI4sa9A
Excellent selections!
"We have zips in the wire down here. I say again...expend all remaining rounds on my pod."
Or, as Kunstler stated in his recent rant:
..the Fed has been acting as a dumpster...by the banks since TARP, with a balance sheet that must look like a suicide note...."
At first blush that is funny, but doesn't it just mean that the Fed is going to own everything and have us paying off the debt, to them, forever?
yes...if the center holds.
Now that the middle class has been effectively gutted they may perceive that they are no longer stakeholders in the status quo. Belief in and adherence to the rule of law could deteriorate beyond the fed or any authority's ability to control. If that happens it won't matter what the Fed's ledger says...the scoreboard will say Anarchy 1, Civilization 0.
And trust me, I am one of civilization's most ardent fans.
Neo in The Matrix learns "there is no spoon." The US decides "There is no balance sheet." I think the rule of law is GONE. I am just waiting to see how long it takes the US public to figure it out. It could be years with enough NASCAR, Dancing with the Stars, American Idol, and football. Or it could be sooner than that with resource depletion making all these fine distractions unavailable.
We are on the same page, I am quite sure of it.
Hilarious. The morons who advised buying TIPS over gold getting what they deserve. Don't feel bad for them, they'll be living off the rest of us soon enough.
The difference is, you can guarantee the return you will (won't) get on TIPS.
Can you guarantee me the return on gold? Ok i know i know, its going to $2000 and beyond. But you can't guarantee this.
Certainty is worth a negative yield in uncertain times.
In order for the Federal Reserve to remain in power, it is essential that the voting public doesn't become aware of the Congressional power to strip the Fed of all it's rights and powers: most especially the printing of the currency (more accurately phrased in modern time as controlling the liquidity in the "system.")
The top 5% support the system. They live off the free money generated from the decades of abusive US economic policy ... slavery, inflation, etc. Economic Imperialism is a reality codified in dollar hegemony. I'm not saying I want to double the cost of my whopper with cheese, but the Chinese have woken up to the schill game of the Federal Reserve.
The bottom 30% are simply too stupid to engage in this debate. They vote with their stomachs for whatever free money the socialists throw off to them, while assucing those of us who work as being "dis-compassionate." I'm not discompassionate to other people's needs ... but taking 40% of my weekly paycheck and giving it to Bank of America through the Federal Reserve system is an outright lie.
We have four social classes, mixed with a bevy of entangled individuals oscilating between complex economic theories with little knowledge to make informed decisions. A creature of habit is stronger than a creature of instinct, giving way to the rise of slavery and the centuries it was institutionalized by a society only focused on the self. Fear of slipping to the bottom is balanced against an offer of breaking the glass ceiling of the social structure. This economic solution isn't broken ... the government's deliberate attempt to manipulate markets to reward political cronies and "too big to fail" institutions while blatantly sacrificing the remainder of society to retain the shackles of dollar hegemony is moral hazard at it's peek.
The last remnent of that slave system has created a curious beast wherein the slaves have no color. They have no gender. They have no identity ... just a FICO score. Corporations have degraded from family businesses into bottom-line psychopaths enabled by SCOTUS to further capitulate the American taxpayers into submission. All the while, allowing the easy transfer of wealth from one generation to the next without regard for the "broader economy."
My economics professor in high school told me, "People vote their pocketbooks." I expect the same this coming November 2nd. But as the "pocket book" of that "middle-class" becomes less persuaded by the pathetic arguments of the banks trying to take their house ...
Will Obama let the big banks fail?
Will he use the Executive authority to shut down the Big 5 megabanks that are zombies bleeding the population with frauds?
Sadly, I don't expect it ... I hope, and then buy physical gold along with food.
Let me get this straight, when CPI rallies and the TIP principal inflates, these guys will be paying more [par+CPI]*(-0.055) toward the government. This just cant be...
Yup, 1/2yr payment is ((FV + CPI)*CPN/2)
At maturity, investors receive either the inflation-adjusted principal or par value; the higher one.
Some back of the envoloppe math.
Current non protected yield 1.2%
Protected yield -0.5%
Implied inflation 1.7%
What am I missing ?