Treasury Bills, Notes, and Bonds Discussion 2024+

[Spock]

Until they come out with TIPS that pay based on your personal inflation then I guess you are out of luck. You're claiming that your expenses have increased 7% annually since 2019?... 7% a year for 5 years in a row? And that it is all from higher prices and none from higher consumption?

I don't expect any investment to be aware of anybody's personal inflation rate.

I do think people should be aware that the official CPI rates applied to TIPS are not necessarily going to protect them from inflation if their personal (base) spending is being impacted by inflation rates greater than CPI reflects. I see a lot of people (mostly on reddit) that think they can simply buy TIPS and think they are protected from inflation and gave my personal experience as an example.

As far as my expenses, I've tracked all spending to the penny since 2014. Since 2019 my spending on groceries (not including restaurants), utilities, insurance, property taxes, vehicle maint, home upkeep (minus big ticket "one off" items like replacing carpet or a storage shed) has gone up 7% on average per year. The listed categories make up north of 90% of our spending. Home insurance, property taxes, and groceries are the areas that make up most of the increases.

 

[ShokWaveRider]

I must admit I have trouble understanding how TIPS can hedge against inflation, they must do as folks here tout them a lot. Their rates seem so low in comparison. Except perhaps when Inflation was around 9%. I just feel more comfortable with a 5.5% MYGA at today's levels.

 

[tulak]

You can’t look at only the rate for TIPS to understand their full return. Lots of material available on how this is calculated, so I won’t cover it here, but here’s an interesting retrospective from tipswatch on how well a maturing 10-year TIPS performed.

A 10-year TIPS is maturing July 15. How did it do as an investment?​

Posted on July 13, 2025 by Tipswatch
Answer: Very well, in keeping with recent trends.

…

The final investment results for this TIPS were set by the May inflation report released June 11. Data from Eyebonds.info show this TIPS generated a 10-year nominal annual return of 3.529%, easily exceeding the comparable T-note at 2.29%.

A 10-year TIPS is maturing July 15. How did it do as an investment?

Answer: Very well, in keeping with recent trends. By David Enna, Tipswatch.com Back on July 23, 2015, the U.S. Treasury auctioned a fairly routine 10-year TIPS, CUSIP 912828XL9, generating a real y…

tipswatch.com

 

[audreyh1]

I must admit I have trouble understanding how TIPS can hedge against inflation, they must do as folks here tout them a lot. Their rates seem so low in comparison. Except perhaps when Inflation was around 9%. I just feel more comfortable with a 5.5% MYGA at today's levels.

As Tulak infers, those are the real rates above recent CPI. So you get both.

 

[Montecfo]

I guess that’s what has been driving equity markets to record highs yet again.

Well that and stronger than expected earnings.

 

[Montecfo]

As Tulak infers, those are the real rates above recent CPI. So you get both.

Yes. They are not great if you need income but on a total return basis they can make some sense especially if your alternative is nominal treasuries or CDs.

I do not look at them as protecting me from inflation. I view them as Treasury bonds with possibly an improved total return of bought correctly. My equities are the inflation hedge.

But I tend to stick with the 5Y.

 

[tulak]

I look at TIPS as guaranteed minimum inflation adjusted income in case SHTF. It’s also there as a hedge against SORR, since I’m not retired yet.

 

[Chuckanut]

I look at TIPS as guaranteed minimum inflation adjusted income in case SHTF. It’s also there as a hedge against SORR, since I’m not retired yet.

Montecfo:
I do not look at them as protecting me from inflation. I view them as Treasury bonds with possibly an improved total return of bought correctly. My equities are the inflation hedge.

I view TIPS as one way to diversify my savings in the event another big round of inflation heads our way. The key word above is “diversify”.

As mentioned in other threads, I am very uncomfortable with the Federal deficit spending and the “don’t give a darn” attitude towards it from our elected leaders. I also was a young adult in the late 70s and early 80’s when double digit inflation was devouring the wealth of many savers. I actually had a 10 year treasury, IIRC, yielding double digits. WOW. But, inflation was even higher for part of those 10 years. I’m not sure if after taxes I managed to break even. Like Montecfo, equities remain my prime inflation protection.

 

[audreyh1]

I bought some 5 year TIPS in late 22 and 23 just because they were reaching multi-decade real interest rate highs. But that’s enough for me.

Equities is my inflation protection.

 

[COcheesehead]

I read this morning more foreign sovereign states hold more gold than US treasuries. A reversal from the past.

 

[Midpack]

I read this morning more foreign sovereign states hold more gold than US treasuries. A reversal from the past.

https://www.financialexpress.com/market/gold-pulse/central-banks-now-hold-more-gold-than-us-treasuries-for-the-first-time-in-30-years/3962153/

A link is always appreciated.

 

[Original Wally]

Equities is my inflation protection.

Yup

 

[big-papa]

I like "AND" more than "OR". TIPS are my floor of inflation protection (along with SS) and equities are my growth, hopefully over longer periods of time outpacing inflation.

Cheers.

 

[MichaelB]

https://www.financialexpress.com/market/gold-pulse/central-banks-now-hold-more-gold-than-us-treasuries-for-the-first-time-in-30-years/3962153/

A link is always appreciated.

Thanks!

I don’t think the Treasury news is significant. The primary is not buying by foreign central banks, it’s the increase in price of gold.

Foreign central banks have to hold US Treasuries, it’s the primary tool for them to prevent appreciation of their currencies.

 

[Mulligan]

Yes. They are not great if you need income but on a total return basis they can make some sense especially if your alternative is nominal treasuries or CDs.

I do not look at them as protecting me from inflation. I view them as Treasury bonds with possibly an improved total return of bought correctly. My equities are the inflation hedge.

But I tend to stick with the 5Y.

I realize the “bought correctly “ is the important part. But as a side note, I see the long end TIPS fixed been moving higher while the 5 year is dropping. As present it barely sits above IBOND fixed rate. That doesnt bode well for next IBOND reset. I will snag one more via the gift process before Nov. 1. Most of mine are 1.3% and looks to be the high water mark for those.

 

[big-papa]

I realize the “bought correctly “ is the important part. But as a side note, I see the long end TIPS fixed been moving higher while the 5 year is dropping. As present it barely sits above IBOND fixed rate. That doesnt bode well for next IBOND reset. I will snag one more via the gift process before Nov. 1. Most of mine are 1.3% and looks to be the high water mark for those.

Since about 2015, 65% of the average 5 year TIPS rate over the 6 month period before a new I-bond is issued has been a perfect predictor of the new fixed rate, when rounded to the nearest 0.1% I calculate it monthly. At the end of July, it was at 1.1% but as of the end of August, it's now predicting 1.0% and there has been a clear downward trend in the 5 year yield for a while now.

It's always a little bit apples vs. oranges, though, when comparing TIPS and I-bonds because of the different way each of them operate. But how each of them operate is well enough documented that one can choose which, or both, meets a particular need. (We're in the "both" camp, and use each of them very differently)

Cheers.

 

[Mulligan]

Since about 2015, 65% of the average 5 year TIPS rate over the 6 month period before a new I-bond is issued has been a perfect predictor of the new fixed rate, when rounded to the nearest 0.1% I calculate it monthly. At the end of July, it was at 1.1% but as of the end of August, it's now predicting 1.0% and there has been a clear downward trend in the 5 year yield for a while now.

It's always a little bit apples vs. oranges, though, when comparing TIPS and I-bonds because of the different way each of them operate. But how each of them operate is well enough documented that one can choose which, or both, meets a particular need. (We're in the "both" camp, and use each of them very differently)

Cheers.

The 5 year has fell off the cliff the past 10 days. Under 1.2% fixed now. Who knows, but two months left its very possible the IBond yield could go sub 1%. I have also assumed your formula from other readings too. I also agree they serve different needs. I dont as of now for me need the TIPS, but I like the IBonds for a long term cash emergency, taxed deferred savings fund.

 

[COcheesehead]

Think the 10 year dips under 4%?

 

[Mulligan]

Since about 2015, 65% of the average 5 year TIPS rate over the 6 month period before a new I-bond is issued has been a perfect predictor of the new fixed rate, when rounded to the nearest 0.1% I calculate it monthly. At the end of July, it was at 1.1% but as of the end of August, it's now predicting 1.0% and there has been a clear downward trend in the 5 year yield for a while now.

It's always a little bit apples vs. oranges, though, when comparing TIPS and I-bonds because of the different way each of them operate. But how each of them operate is well enough documented that one can choose which, or both, meets a particular need. (We're in the "both" camp, and use each of them very differently)

Cheers.

Tips Watch waved the flag and thought the fixed rate will now be .9%. Not surprising to me he readjusted as 5 year TIPS fixed has plummeted quickly. I will definitely get that last 10k tranche I want via gift box before Nov. The gift box loophole is still wide open. I just dont really want or need anymore after this next gift purchase.

 

[big-papa]

Tips Watch waved the flag and thought the fixed rate will now be .9%. Not surprising to me he readjusted as 5 year TIPS fixed has plummeted quickly. I will definitely get that last 10k tranche I want via gift box before Nov. The gift box loophole is still wide open. I just dont really want or need anymore after this next gift purchase.

Wouldn't surprise me if dropped further from my predicted 1.0% to 0.9% since I last did my calculation.

We did our last gift box purchase just before last November's reset and got the 1.3% ones. We're done now as we now have I-bonds maturing every year for 10 years, starting with the year we turn 85, though the last one matures in November before the year we turn 95. I'm sure we won't care so much by then, if we're still around.

 

[Mulligan]

Wouldn't surprise me if dropped further from my predicted 1.0% to 0.9% since I last did my calculation.

We did our last gift box purchase just before last November's reset and got the 1.3% ones. We're done now as we now have I-bonds maturing every year for 10 years, starting with the year we turn 85, though the last one matures in November before the year we turn 95. I'm sure we won't care so much by then, if we're still around.

Sounds like you are full to the brim! Fall of 23 I ran out of friends I trusted to give them the max annual gift limit, so they could in turn buy gifts for me, then send them to me after the 5 day waiting period. This past year I noticed they would only allow a limit of $10k gift to be sent per person for a calendar year. The previous year they allowed more as long as it was no more than 10k per gift sent.
I had to do that to get rid of all the 0% fixed ones to recycle into the 1.3% fixed.

 

[big-papa]

Sounds like you are full to the brim! Fall of 23 I ran out of friends I trusted to give them the max annual gift limit, so they could in turn buy gifts for me, then send them to me after the 5 day waiting period. This past year I noticed they would only allow a limit of $10k gift to be sent per person for a calendar year. The previous year they allowed more as long as it was no more than 10k per gift sent.
I had to do that to get rid of all the 0% fixed ones to recycle into the 1.3% fixed.

Wow - I guess I never thought about doing it that way, though I have to say that there are very few friends I would trust in that capacity. Wife and I simply mutually gifted each other.

 

[Chuckanut]

Five year TIPS are now edging below 1.1%.

Ten year is about 1.7%. Better but good enough for such a longer term? I don’t know

I will tread water for a while in regards to TIPS.

 

[big-papa]

Tips Watch waved the flag and thought the fixed rate will now be .9%. Not surprising to me he readjusted as 5 year TIPS fixed has plummeted quickly. I will definitely get that last 10k tranche I want via gift box before Nov. The gift box loophole is still wide open. I just dont really want or need anymore after this next gift purchase.

I went back and compared my calculation to tipswatch's calculation.
They are also getting a current estimate of 1.0% just as I did based only on actual data for the current 6 month period.
The 0.9% is a more speculative number they derived by assuming current yields stay the same for the remainder of the 6 month period. When I was still buying I-bonds, I generally waited until a week or so before the 6 month period ends to decide whether to take current yields or next period yields as things can change pretty quickly. That said, I wouldn't at all be surprised if we end up at 0.9% or perhaps even lower.

Cheers.

 

[Mulligan]

I went back and compared my calculation to tipswatch's calculation.
They are also getting a current estimate of 1.0% just as I did based only on actual data for the current 6 month period.
The 0.9% is a more speculative number they derived by assuming current yields stay the same for the remainder of the 6 month period. When I was still buying I-bonds, I generally waited until a week or so before the 6 month period ends to decide whether to take current yields or next period yields as things can change pretty quickly. That said, I wouldn't at all be surprised if we end up at 0.9% or perhaps even lower.

Cheers.

Nothing certainly wrong with waiting until the end to get best calculation. In this case its a total no brainer to buy this cycle over next cycle in terms of maximizing the fixed component. With less than 2 months left there is no real way the fixed can reverse trajectory to beat the present 1.1%.
The Series EE Bond owners have just been abused the past several years. That present formula if any is just horrible. Back in the day, for several years it was 90% of the 5 year treasury. It is not within earshot of that today.
For me that is why I like a variety of income sources as accurately predicting interest rates is a hazardous occupation.
When some of my CDs mature I could find them to be paying under the current total IBond yield. That would not have been the case 6 months ago. That is also why I have long end income issues also. That can change week to week also and having recently purchased some is working well now.

One week the expert media hypes 10 year heading to 5%, a couple weeks later the discussion flips to if it breaks 4%. I try to ignore the noise and focus more on allocation size.