Real Return, from Greg Van Kipnis
I attached the latest calculation for the yield on TIPS. The prices across the board have dropped rapidly in the last few days to the point were greater than 1% real yields can be realized above the CPI on Treasuries for maturities as short as 2022. I find this quite surprising. Any thoughts about the pros and cons of this opportunity which hasn't been seen in years.
Treasury Inflation-Protected Securities
Friday, October 05, 2018
Treasury Inflation-Protected Securities, or TIPS, are securities whose principal is tied to the Consumer Price Index (CPI) . The principal increases with inflation and decreases with deflation. When the security matures, the U.S. Treasury pays the original or adjusted principal, whichever is greater. TIPS pay interest every six months. Figures after periods in bid and ask quotes represent 32nds; 101.26 means 101 26/32, or 101.8125% of 100% face value; 99.01 means 99 1/32, or 99.03125% of face value.
| Maturity | Coupon | Bid | Asked | Chg | Yield* | Accrued principal |
| 2019 Jan 15 | 2.125 | 100.10 | 100.12 | + 1 | 0.770 | 1173 |
| 2019 Apr 15 | 0.125 | 99.15 | 99.17 | + 2 | 1.022 | 1075 |
| 2019 Jul 15 | 1.875 | 101.08 | 101.10 | unch. | 0.160 | 1180 |
| 2020 Jan 15 | 1.375 | 100.22 | 100.24 | + 1 | 0.791 | 1165 |
| 2020 Apr 15 | 0.125 | 98.20 | 98.22 | + 1 | 0.989 | 1076 |
| 2020 Jul 15 | 1.250 | 101.01 | 101.03 | unch. | 0.622 | 1155 |
| 2021 Jan 15 | 1.125 | 100.14 | 100.16 | unch. | 0.898 | 1152 |
| 2021 Apr 15 | 0.125 | 97.25 | 97.27 | unch. | 0.998 | 1063 |
| 2021 Jul 15 | 0.625 | 99.17 | 99.19 | - 1 | 0.771 | 1118 |
| 2022 Jan 15 | 0.125 | 97.09 | 97.11 | - 1 | 0.950 | 1113 |
| 2022 Apr 15 | 0.125 | 96.28 | 96.30 | - 2 | 1.014 | 1036 |
| 2022 Jul 15 | 0.125 | 97.09 | 97.11 | - 1 | 0.845 | 1095 |
| 2023 Jan 15 | 0.125 | 96.14 | 96.16 | - 2 | 0.966 | 1091 |
| 2023 Apr 15 | 0.625 | 98.09 | 98.11 | - 2 | 0.999 | 1014 |
| 2023 Jul 15 | 0.375 | 97.18 | 97.21 | - 3 | 0.880 | 1082 |
| 2024 Jan 15 | 0.625 | 98.03 | 98.06 | - 3 | 0.981 | 1080 |
| 2024 Jul 15 | 0.125 | 95.13 | 95.16 | - 4 | 0.927 | 1061 |
| 2025 Jan 15 | 0.250 | 95.06 | 95.09 | - 4 | 1.031 | 1064 |
| 2025 Jan 15 | 2.375 | 108.03 | 108.06 | - 6 | 1.024 | 1337 |
| 2025 Jul 15 | 0.375 | 95.30 | 96.01 | - 6 | 0.982 | 1062 |
| 2026 Jan 15 | 0.625 | 96.27 | 96.30 | - 7 | 1.065 | 1060 |
| 2026 Jan 15 | 2.000 | 106.15 | 106.18 | - 7 | 1.060 | 1269 |
| 2026 Jul 15 | 0.125 | 93.08 | 93.11 | - 6 | 1.019 | 1051 |
| 2027 Jan 15 | 0.375 | 94.11 | 94.14 | - 7 | 1.080 | 1043 |
| 2027 Jan 15 | 2.375 | 110.04 | 110.07 | - 8 | 1.080 | 1249 |
| 2027 Jul 15 | 0.375 | 94.11 | 94.14 | - 7 | 1.041 | 1030 |
| 2028 Jan 15 | 0.500 | 94.21 | 94.24 | - 9 | 1.098 | 1021 |
| 2028 Jan 15 | 1.750 | 105.21 | 105.24 | - 9 | 1.097 | 1203 |
| 2028 Apr 15 | 3.625 | 122.18 | 122.23 | - 12 | 1.104 | 1558 |
| 2028 Jul 15 | 0.750 | 97.00 | 97.06 | - 9 | 1.056 | 1004 |
| 2029 Jan 15 | 2.500 | 113.11 | 113.16 | - 12 | 1.106 | 1173 |
| 2029 Apr 15 | 3.875 | 126.31 | 127.04 | - 14 | 1.131 | 1533 |
| 2032 Apr 15 | 3.375 | 127.21 | 127.26 | - 17 | 1.147 | 1419 |
| 2040 Feb 15 | 2.125 | 116.28 | 117.02 | - 34 | 1.216 | 1166 |
| 2041 Feb 15 | 2.125 | 117.16 | 117.22 | - 37 | 1.219 | 1150 |
| 2042 Feb 15 | 0.750 | 90.04 | 90.09 | - 34 | 1.231 | 1115 |
| 2043 Feb 15 | 0.625 | 87.03 | 87.08 | - 35 | 1.233 | 1096 |
| 2044 Feb 15 | 1.375 | 102.29 | 103.02 | - 38 | 1.234 | 1081 |
| 2045 Feb 15 | 0.750 | 88.29 | 89.02 | - 38 | 1.238 | 1070 |
| 2046 Feb 15 | 1.000 | 94.10 | 94.16 | - 41 | 1.238 | 1063 |
| 2047 Feb 15 | 0.875 | 91.06 | 91.12 | - 40 | 1.238 | 1044 |
| 2048 Feb 15 | 1.000 | 94.03 | 94.08 | - 46 | 1.234 | 1022 |
*-Yld. to maturity on accrued principal.