5 Year TIPS Price At Record Low -1.286%

Tyler Durden's picture


Think NIRP is only allowed in select European countries. Moments ago the US Treasury sold a whopping for the series $14 billion in TIPS. The yield? A record low -1.286%, courtesy of TIPS being the only US debt instrument allowed to price at a negative yield (but not for long: JPM's new head of the London CIO divison Matt Zames who is also head of the TBAC is working hard at getting negative yields legalized across the board). The first time the Treasury sold TIPS at a negative rate was back in 2010, when it priced $11 billion at -0.55%. The comment back then: "It signals people’s expectation of the Fed being able to create some inflation with the QE program,” said Alex Li, an interest-rate strategist in New York at Deutsche Bank AG, which as a primary dealer is required to bid at Treasury auctions. “With nominal rates so low, in order have high TIPS breakevens you’ve got to have negative real yields on the five-year." It didn't then. It won't now. Of course, if the CPI were actually adjusted to reflect reality, then TIPS would be the best investment imaginable. As it stands right now, it will likely keep losing money until such time as the CTRL and P keys are finally superglued in the on position.

From the Treasury:

and a chart of 5 year TIPS yields courtesy of John Lohman:

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Thu, 08/23/2012 - 13:22 | 2730902 JeremyWS
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Thu, 08/23/2012 - 13:23 | 2730908 Boilermaker
Boilermaker's picture

Look at the IYR...man, that's some funny shit.

How long can they hold the REITs up day after day?  Why is this so (obviously) uber important?

Thu, 08/23/2012 - 13:40 | 2730979 diogeneslaertius
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the scariest answer i can think of would be: Indefinately

its the zombie instrument apocalypse XD

Thu, 08/23/2012 - 13:24 | 2730912 Arnold Ziffel
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Not such good news for those who were told by their advisors that TIPS are a good way to hedge against inflation.



Thu, 08/23/2012 - 13:35 | 2730968 Stoploss
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Wait until this backfeeds to China.. Hehehehe...  I love it.

Thu, 08/23/2012 - 13:38 | 2730978 vast-dom
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compared to the other garbage their advisors peddled them it's good hedge. this shit it out of control! 

Thu, 08/23/2012 - 13:39 | 2730985 diogeneslaertius
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out of control is the new normal

Thu, 08/23/2012 - 13:46 | 2730990 vast-dom
vast-dom's picture

yeah that's what i meant. 


when banks are no longer in banking biz and exclusively in hedged ponzi gambling as propped up by the fed and gov and paid for by taxpayer and magic cntrl+p money what the fuck does anyone expect? 

Thu, 08/23/2012 - 13:27 | 2730922 malikai
malikai's picture

Bonds across the board are rebounding hard.


Thu, 08/23/2012 - 13:27 | 2730924 lolmao500
lolmao500's picture

So you pay 1.28% of your money to keep US bonds... makes total sense.

Thu, 08/23/2012 - 13:30 | 2730937 reader2010
reader2010's picture

They're gang-raping you like there's no tomorrow. And you pay them to rape you too.

Thu, 08/23/2012 - 13:39 | 2730989 diogeneslaertius
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bottom line

Thu, 08/23/2012 - 13:32 | 2730955 buzzsaw99
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cpi bitchez

Thu, 08/23/2012 - 13:33 | 2730961 SAT 800
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Very important; good reporting.

Thu, 08/23/2012 - 13:36 | 2730975 diogeneslaertius
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fuckin reality is living on a prison planet owned by control freak madmen

very good reportage as usual

Thu, 08/23/2012 - 13:38 | 2730976 JamesBond
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Sure -  I'll hold your money fer ya

But it'll cost ya




Thu, 08/23/2012 - 13:47 | 2731023 q99x2
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Lucky to get your money back at all with the worthless fiat the banksters are pumping into the system.

Thu, 08/23/2012 - 13:48 | 2731030 Jim B
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Thu, 08/23/2012 - 13:50 | 2731039 taketheredpill
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Breakeven is 1.9%.  So cpi needs average 2% over next 5 years (currently at 1.4% and falling fast) to make money vs nominal bond.

Breakeven trading into tight triangle with +/- 1% on break.


Thu, 08/23/2012 - 14:00 | 2731069 ejmoosa
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Wish I could find a bar that would pay me to drink....

Thu, 08/23/2012 - 14:20 | 2731153 nickels
nickels's picture

Note to self: Always do the opposite of what you think.

Thu, 08/23/2012 - 14:21 | 2731159 mirac
mirac's picture

I would like to see a price chart of those Tips... 

Thu, 08/23/2012 - 14:30 | 2731198 kevinearick
kevinearick's picture

of course JPM must have negative rates to survive. it's in the vice, feeling the unknown pressure, as more and more middlemen either wise up, getting out, or get crushed. there is no exit for JPM.

Thu, 08/23/2012 - 14:30 | 2731200 zrussell
zrussell's picture

Can some explain how a negative treasury interest rate works for the investor? (I know it's not a good thing, but don't understand why anyone would do such a thing)

Thu, 08/23/2012 - 17:59 | 2731832 Shelby Moore III
Shelby Moore III's picture

The 5 year minus the TIPs is nearly 2% now, so it has been rising. No chance the Fed will start QE3 now. Inflation expectations are too high. Fed will be forced to wait for a crisis. Click the following link for a chart showing that QE only starts when 5 year minus the TIPs is below 1.5%:


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