Wednesday, September 28, 2022

I'm buying TIPS again

In my last post lamenting the paucity of options available to low risk investors I highlighted the guaranteed negative return one would receive investing in Inflation Protected Bonds from the US Treasury.

Oh my, how the world can change in a few short months.

What was once guaranteed punishment has flipped dramatically.  My mental buy price was a real 1% on the 10 year TIP rate.  We recently passed that and thus I will started buying these once again at auction for my clients in certain situations.  For those of you who don't wish to purchase individual bonds or deal with the tax headaches (I do this for some clients as well) you can mimic the return by buying the etf TIPS

Considering the parabolic move in yield (and converse decline in price) be careful. Remember I'm holding these individual bonds to maturity so I would prefer it (at least for this part of the portfolio mix) if the yield continues to rise.  How high the yield may rise is something I cannot answer but at least one is no longer punished for saving right now.