This is from the treasurydirect DOT gov website, FAQ:
"What happens to TIPS if deflation occurs?
The principal is adjusted downward, and your interest payments are less than they would be if inflation occurred or if the Consumer Price Index remained the same. You have this safeguard: at maturity, if the adjusted principal is less than the security's original principal, you are paid the original principal."
This answer from the US Treasury applies to individual TIPs bonds, obviously. During the 2008 selloff, when the fear of deflation was significant, the TIP fund fell into the low 90s, as I remember.
I'm wondering the same thing - why no dividends since I think December? Doesn't look like on the chart there has been that long between dividend going back at least 3 years.
TARGET Dollar Bin - Inflation Indicator
Has anyone noticed that their dollar bin is filled with three dollar items? That's 3x fold increase. Big inflation for bargain bin product area to jump 3.0 times in price.
According to the TIP fund website, the TIP fund has a real yield of 0.09%. This means it pays a dividend (on average) of inflation plus 0.09%. Average weighted maturity is 8.26 years.
On the other hand, as of today an individual TIP bond with a maturity of 8 years has a real yield to maturity of about 0.6%. So I guess that means if you are willing to buy individual bonds (and give up the convenience of the TIP fund) you can make an additional half percent per year.
Just food for thought.
Indeed... The bankers do suck the value of your money right out of your pocketbook and try to disguise their theft by calling it "inflation". Bankers fool a lot of people.
Has anyone else noticed that their ATM has changed from $40 Fast Cash to $100 Fast Cash? That's a 2.5x fold increase in what the banks think you need to have on hand as fast cash. Big inflation in prices to need 2.5 times more money.
EFTs exaggerate all moves--expect a much more Volatile environment with them around than in past years.
That kind of forced selling will be seen in stocks, probably within the next year or two.
This tends to move with interest rates, even though it is not a fixed rate bond portfolio. When the Fed has been buying bonds and driving down long term treasury rates to below 2%, this rallied into the $120s. Once the Fed started talking about tapering its bond purchases (causing long term interest rates to go up), this security has dropped 10%.
So, what would drive the price up again is lower interest rates, which would likely happen now if the economic numbers start looking weak again. Weak numbers might change the Feds tapering plans and long term rates might go back down again.
It doesn't seem too likely at the moment for this to go back to $118. The bond rates below 2% were an abberation, and not that likely to return under normal economic conditions. If you think rates are going up even further, then this is not the best thing to hold.
Looking at the long-term chart, a price of 105 looks to be a decent point to buy in, at least a partial buy. At that price, real yields on the 7-10 year TIPs will be over 1 percent.