I've updated my comparisons to include the 5-year and 10-year TIPS maturing in 2016.
The table below compares the results of a purchase at each auction of 5-year TIPS with a purchase on the same date of a hypothetical
nominal Treasury maturing on about the same date as the TIPS. In 2011 the nominal Treasury purchase provided a yield from 0.51% to 0.93% points higher than the TIPS purchase. For example, the real yield of the 4/15/2016 TIPS bought at the initial auction on 4/21/2011 was
-0.18%. After CPI adjustment, the nominal yield came in at 1.21%. (See
this web page.) The 5-year constant maturity nominal Treasury yielded 2.14% on 4/21/2011. (See
this web page.) This was 0.93% points more than the nominal yield on the TIPS. Looked at another way, the 2.32% breakeven yield (2.14% less
-0.18%) was 0.93% points more than the actual 1.39% increase due to the CPI. Since 1997, excluding two unusual 5-year auctions that occurred in October 2008 and April 2009, the purchaser of nominal Treasuries would have gotten a yield 0.25% points higher on average than a TIPS purchaser.
5-Year TIPS Auctions 1997 - 2011
Code: Select all
--------------- T I P S --------------- Nominal
Real Actual Actual Nominal BrkEven less
Coupon Matures Auction Yield Yield CPI Chg Yield CPI Chg TIPS
Code: Select all
3.625 Jul 2002 07/09/97 3.74 6.10 2.36 6.15 2.41 0.05
3.625 Jul 2002 10/08/97 3.60 6.02 2.42 5.95 2.35 (0.08)
0.875 Apr 2010 10/26/04 0.95 3.45 2.50 3.35 2.40 (0.10)
0.875 Apr 2010 04/26/05 1.20 3.71 2.51 3.96 2.76 0.25
0.875 Apr 2010 10/25/05 1.74 4.00 2.26 4.40 2.66 0.39
2.375 Apr 2011 04/25/06 2.38 4.57 2.19 4.98 2.60 0.42
2.375 Apr 2011 10/23/06 2.69 4.51 1.82 4.81 2.12 0.30
2.000 Apr 2012 04/24/07 2.11 4.38 2.27 4.51 2.40 0.13
2.000 Apr 2012 10/23/07 1.95 3.97 2.01 4.01 2.05 0.04
0.625 Apr 2013 04/22/08 0.75 2.53 1.79 2.96 2.22 0.43
0.625 Apr 2013 10/27/08 3.27 4.48 1.21 2.45 (0.82) (2.04) <- unusual
1.250 Apr 2014 04/23/09 1.28 3.31 2.03 1.89 0.61 (1.42) <- unusual
1.250 Apr 2014 10/26/09 0.77 2.63 1.87 2.29 1.52 (0.35)
0.500 Apr 2015 04/26/10 0.55 2.13 1.58 2.60 2.05 0.47
0.500 Apr 2015 10/25/10 (0.55) 1.04 1.59 1.03 1.58 (0.01)
Code: Select all
0.125 Apr 2016 04/21/11 (0.18) 1.21 1.39 2.14 2.32 0.93
0.125 Apr 2016 08/18/11 (0.83) 0.23 1.05 0.80 1.63 0.57
0.125 Apr 2016 12/15/11 (0.88) 0.18 1.06 0.70 1.57 0.51
---- ---- ---- ---- ---- ----
Average 1.36 3.25 1.88 3.28 1.91 0.03
---- ---- ---- ---- ---- ----
Average excl 10/08 & 4/09 1.25 3.17 1.92 3.41 2.16 0.25
The table below shows a similar comparison for 10-year TIPS. In 2006 a purchase of 10-year nominal Treasuries provided a yield from 0.53% to 0.76% points higher than 10-year TIPS purchased at the four auctions that year. For example, the real yield of the 1/15/2016 TIPS bought at the initial auction on 1/12/2006 was 2.03%. After CPI adjustment, the nominal yield came in at 3.89%. (See
this web page.) The 10-year constant maturity nominal Treasury yielded 4.42% on 1/12/2006. (See
this web page.) This was 0.53% points more than the nominal yield on the TIPS. Looked at another way, the 2.40% breakeven yield (4.42% less 2.03%) was 0.53% points more than the actual 1.87% increase due to the CPI. However since TIPS' introduction in 1997, the purchaser of nominal 10-year Treasuries would have gotten a yield 0.27% points
lower on average than a 10-year TIPS purchaser.
10-Year TIPS Auctions 1997 - 2006
Code: Select all
--------------- T I P S --------------- Nominal
Real Actual Actual Nominal BrkEven less
Coupon Matures Auction Yield Yield CPI Chg Yield CPI Chg TIPS
Code: Select all
3.375 Jan 2007 01/29/97 3.45 5.91 2.46 6.63 3.18 0.73
3.375 Jan 2007 04/08/97 3.65 6.11 2.46 6.91 3.26 0.80
3.625 Jan 2008 01/08/98 3.73 6.36 2.63 5.49 1.76 (0.87)
3.625 Jan 2008 10/07/98 3.65 6.40 2.75 4.34 0.69 (2.06)
3.875 Jan 2009 01/06/99 3.90 6.66 2.76 4.73 0.83 (1.93)
3.875 Jan 2009 07/07/99 4.04 6.81 2.77 5.94 1.90 (0.86)
4.250 Jan 2010 01/12/00 4.34 6.96 2.62 6.72 2.38 (0.24)
4.250 Jan 2010 07/12/00 4.03 6.58 2.55 6.12 2.09 (0.46)
3.500 Jan 2011 01/10/01 3.52 5.90 2.37 5.10 1.58 (0.80)
3.500 Jan 2011 07/11/01 3.50 5.79 2.29 5.28 1.78 (0.50)
3.375 Jan 2012 01/09/02 3.48 5.99 2.51 5.10 1.62 (0.89)
3.000 Jul 2012 07/10/02 3.10 5.63 2.53 4.66 1.56 (0.97)
3.000 Jul 2012 10/09/02 2.26 4.81 2.55 3.58 1.32 (1.23)
3.000 Jul 2012 01/08/03 2.34 4.91 2.57 3.93 1.59 (0.98)
1.875 Jul 2013 07/09/03 2.00 4.43 2.43 3.73 1.73 (0.70)
1.875 Jul 2013 10/09/03 2.23 4.70 2.47 4.28 2.05 (0.42)
2.000 Jan 2014 01/08/04 2.02 4.43 2.41 4.27 2.25 (0.16)
2.000 Jan 2014 04/07/04 1.81 4.23 2.42 4.15 2.34 (0.08)
2.000 Jul 2014 07/08/04 2.02 4.39 2.37 4.49 2.47 0.10
2.000 Jul 2014 10/07/04 1.89 4.26 2.38 4.23 2.35 (0.03)
1.625 Jan 2015 01/13/05 1.73 3.94 2.22 4.20 2.48 0.26
1.625 Jan 2015 04/14/05 1.75 4.01 2.26 4.35 2.60 0.34
1.875 Jul 2015 07/14/05 1.94 3.99 2.05 4.19 2.25 0.20
1.875 Jul 2015 10/13/05 1.98 4.00 2.03 4.47 2.49 0.47
Code: Select all
2.000 Jan 2016 01/12/06 2.03 3.89 1.87 4.42 2.40 0.53
2.000 Jan 2016 04/12/06 2.41 4.33 1.92 4.98 2.57 0.65
2.500 Jul 2016 07/13/06 2.55 4.32 1.77 5.08 2.53 0.76 [*]
2.500 Jul 2016 10/12/06 2.43 4.15 1.73 4.79 2.36 0.63 [*]
---- ---- ---- ---- ---- ----
Average 2.78 5.14 2.36 4.86 2.09 (0.27)
* Even though it's not yet the maturity date of the
2.5% 7/15/2016 TIPS, we have known the actual nominal yields of its two issues since the May CPI was released earlier today.