TIPS yields surged to multiyear highs last week. Treasury Inflation-Protected Securities. The bonds that protect you from inflation by losing value in fourteen different ways the prospectus doesn't mention.
Long-dated TIPS hit these levels because someone finally did the math. Turns out locking in a real yield for thirty years requires believing the U.S. government will exist for thirty years and also accurately report inflation during that time. Both assumptions are doing a lot of work.
The article says investors have a few things to consider before jumping in. A few things. Like they're buying a used Honda, not a derivatives contract on future purchasing power administered by the same people who brought you the debt ceiling crisis as annual performance art.
Here's what happened. Rates went up. TIPS got cheaper. Yields went higher. Retail saw a number above 2% and their neurons fired in sequence for the first time since they bought Dogecoin at seventy cents. Now they want in.
They'll buy at multiyear highs. They'll hold through the next Fed pivot. They'll watch real yields collapse as the government changes the CPI calculation for the ninth time. Then they'll sell at a loss and tell their spouse it was a hedge that didn't work out, as if they knew what the word hedge meant when they clicked the buy button.
The beauty of TIPS is the name. Inflation-Protected. Sounds safe. Sounds smart. Sounds like something a financial advisor would recommend right before he stops returning your calls.
Multiyear highs just means you're buying what everyone else already sold.
Photo by Joachim Schnürle on Unsplash
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