On
sale this week: Treasury Inflation-Protected Securities.
It wasn’t so long ago that the real rate on these bonds was negative. People lent money to the federal government and were assured of getting back, with interest included, less than they started with.
Now the yield on the TIPS due in 2056 is 2.7%, close to as high as it has ever been. That bond will beat the standard-issue unprotected Treasury of 2056, recently paying 5%, if inflation averages at least 2.3% over the next 30 years.
Do you think inflation will average more than 2.3%? It’s a reasonable supposition. The last Consumer Price Index showed up with a 3.8% yearly gain.
