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| TIPS always offer less interest than regular bonds. You give up some yield to pay for the inflation protection. But TIPS buyers are now buying them with negative yields. Which is to say, they pay for the privilege of owning the bonds. Inflation has to beat expectations...and then some...before they are even at breakeven.
Problem is......In the case of TIPS, the people who sell the notes are the same people who determine how much they're worth - because they're the people who figure out the CPI. And right now are they not saying that there isn't any inflation to speak of. According to the people who keep the statistics, the rate of consumer price inflation is barely 1%.
In effect there will be a big delay in the govt declaring that there is inflation, which means the Tips bond holders could get overrun by the time the value setters declare there is value? | |
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Higher Dolar and Higher grain prices. Explanation?Nt.
