FIRE'd@51
Thinks s/he gets paid by the post
- Joined
- Aug 28, 2006
- Messages
- 2,433
There was a TIPS auction today. It was a re-issue of the ten yr bond maturing 1/15/2020 and today's results were 1.43%
Based on today's closing price of $16.15, ISM (matures 1/16/2018) is at 3.17%.
So, the difference between BBB- ISM and govt guaranteed TIPS with similar maturities is 1.74%
I have no clue what that means....... Just saying.......
You are looking at the coupon yield with no inflation going forward. As Rusty says, even if inflation were to be zero over the next 8 years, you would gain 5.6% per year as the price appreciates to par (25) at maturity in March of 2018 (assuming SLM doesn't go belly-up). In addition, the current yield is enhanced by about 1.5 times the inflation rate, resulting in a 0.5 x inflation enhancement to the real coupon yield.