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TIP is a bargain!

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December 10, 2010 – Comments (2)

Believe it or not, this treasury paper is a buy at the current price of 106 and a change. The government is always updating its methodology, which is why TIPS are not trading above par, but soon the reality of inflation will be so obvious that even the government will be forced to admit at least some of it. I think TIP is down because of the sell-off in the ordinary Treasury bonds, but that one will not last long...

2 Comments – Post Your Own

#1) On December 10, 2010 at 1:45 PM, ikkyu2 (99.29) wrote:

As the yield rises, the price will fall.  TIP may be a buy then.  Buying in now for a future expected rise in yield is the same as buying in now for a future expected drop in price, which is not really a very sound strategy.  At the moment, the yield is negative in real, non-adjusted terms.

In other words basically TIP-the-ETF is a secondary market for TIPS.

Completely separately, I'm not particularly impressed at the demonstrated ability of TIPS to track either true inflation or the strength of the dollar.  It tends to fall short.  And since the S+P is denominated in dollars, I think TIP (and TIPS as an asset class) is destined to underperform it. 

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