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iShares TIPS Bond Message Board

  • leuyenl leuyenl Jul 15, 2011 10:34 AM Flag

    10-year TIPS rate

    Mark: what's your prediction on the coming 10-yr TIPS rate? Are you gonna buy any this time? Thanks.

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    • I'm a crappy weatherman, lol.

      All I do to predict upcoming TIPS rates is to look at the current rate. I figure that it's probably the best guess. (It's a bit like saying that since it is cloudy today that it will probably be cloudy tomorrow.)

      Today's current rate (as seen at the US Treasury) is 0.61%. That's therefore the rate I would predict. Could go higher. Could go lower.

      My next planned 10-year TIPS purchase is January 2012. I'll be buying no matter what the rate is. It will be a much smaller than normal purchase mostly because I participated so heavy in the February 30-year TIPS auction this year.

      In theory, my next big 10-year TIPS purchase won't be until 2028. I put a big chunk of money into a 20-year TIPS in 2008 and that's when it will mature.

      I maintain a cash flow spreadsheet to manage my bond ladder. It let's me know about how much I can safely buy each year. I deviated from it a few times based on what interest rates do. For example, the 2.19% rate in February on the 30 year TIPS was just too tempting to pass up. I put about all I could into it. In hindsight, it's treating me very well. Long-term rates have fallen dramatically since then.

      Should TIP fall for some reason (due to deflation and/or debt crisis problems) then I would consider moving some of my short-term online savings money into it. I need that money to fund my expenses over the next 5 years though so I'd need to see a serious bargain in order to take the risk. I generally never like to be in a position where I am forced to sell an investment early. TIP is certainly not free of short-term risks (as last seen in in 2008 when it dropped over 15%).

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