While the first TIPs were issued by the Treasury in 1997 it wasn’t until 2003 that the Treasury Department started making available daily composite yields for TIPS.   Yesterday had the distinction of having the lowest yield in the 8 year history of the 5 year  TIPs at -.490853%.   With the 5 year Treasury at 1.55% the Breakeven Inflation (BEI) is 2.04% over the next 5 years, not a particularly high expectation after the past few months of media coverage of commodity price increases.

For US individual taxable investors fleeing to the safety of Treasuries and paying 28% AMT tax, they can expect to lose .9% per year against inflation as the price of safety.   This distorted fixed income market is tough to navigate and looks to continue for a while.   I wouldn’t be surprised to see more new TIPS issuances with the Treasury seeking to take advantage of the opportunity to pay back debt with cheaper dollars.