TIPS Real Yield Approaching 2% as Treasury Inflation-Protected Securities Gain Momentum

by | Nov 25, 2023 | Inflation Hedge | 2 comments

TIPS Real Yield Approaching 2% as Treasury Inflation-Protected Securities Gain Momentum




This video provides a news update on the 30-year Treasury Inflation-Protected Securities (TIPS)
30-Year TIPS, August 2023. Time to Buy!

30-Year Inflation-Protected Treasuries (TIPS) Yield on Cusp of Exceeding 2% – Bloomberg
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Treasury Inflation-Protected Securities (TIPS) are on the rise, with real yields nearing 2%. This is an exciting development for investors looking for a safe and reliable way to hedge against inflation.

TIPS are a type of government bond that offers protection against inflation. They are indexed to the Consumer Price Index (CPI), which means that the principal value of the bond increases with inflation and decreases with deflation. This unique feature makes TIPS an attractive investment option for those concerned about the erosion of purchasing power over time.

The recent increase in real yields on TIPS is significant because it indicates a greater return for investors, adjusted for inflation. As of [insert date], the 10-year TIPS yield is hovering around 2%, up from previous levels. This uptick in real yields is a result of rising inflation expectations and the Federal Reserve’s commitment to keeping interest rates low.

For investors, a 2% real yield is an attractive proposition, especially in a low-interest-rate environment. TIPS provide a guaranteed return above inflation, making them a valuable addition to a diversified investment portfolio. As the economy continues to recover from the impacts of the pandemic, TIPS offer a way for investors to protect their wealth and preserve their purchasing power.

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Additionally, TIPS can provide a hedge against unexpected inflation, which can erode the value of traditional fixed-income investments. By investing in TIPS, individuals can ensure that their returns keep pace with rising prices, providing a measure of financial security in times of economic uncertainty.

It’s important to note that while TIPS offer protection against inflation, they also come with their own set of risks. Like any investment, TIPS are subject to interest rate fluctuations and market volatility. Investors should carefully consider their risk tolerance and investment objectives before adding TIPS to their portfolio.

In conclusion, the recent increase in real yields on TIPS is a positive development for investors seeking protection against inflation. With real yields nearing 2%, TIPS offer a compelling opportunity to preserve purchasing power and generate a reliable return in a low-interest-rate environment. As the economy continues to evolve, TIPS may prove to be a valuable asset for investors looking to navigate the challenges of a rapidly changing financial landscape.

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2 Comments

  1. Anoop Desai

    Fed funds rate was 2.5 percent in 2018 and it was lowered to zero due to COVID.
    This time rates are expected to get to 5.75 percent by year end. Imagine how much EDV could rally if rates are again dropped to zero from 5.75 percent.

  2. ChannelBri

    Nice video. Looks like 5 Year Treasuries returned 4.86% or 1.86% above inflation from Jan 1926 – July 2023, so the 7 Year TIPS as just over 2% seems like a nice return, much better than the negative yields in years past

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