Why are TIPS bonds only paying about 2⅓% when inflation is at 7.9%?

[xandman]

This instrument seems to be asleep at the wheel.

With inflation weighing in at about 8%, and TIPS bonds paying about 2⅓%. I did the calcuations, and the numbers aren't adding up... maybe one of you can check my math.

Can anyone explain why TIPS bonds aren't covering the inflation rate, when that's their raison d'être; their purpose for existing?

1. https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm#:~:text=Treasury Inflation-Protected Securities, or,original principal, whichever is greater.

TIPS charge you a negative real rate.

Why would they pay you a positive real rate in TIPS when world govt bond rates have a negative real rate of return? Negative real rates has been THE topic for decades. You'll be swimming in research papers without a conclusive answer.

Conversely, PE's have shot up asymptotically and have no meaning.

 

[SunTrader]

Thanks... one would think that TIPS are a good buy in this inflationary market.

It still perplexes me why gold hasn't shot up to at least USD3000

Other than the 1970's I like to know when else in history did Gold climb dramatically higher during an inflationary period?

2001-2011 wasn't sky inflation but Gold certainly was in a bull trend

2015-2020 same

 

[kmiklas]

Other than the 1970's I like to know when else in history did Gold climb dramatically higher during an inflationary period?

2001-2011 wasn't sky inflation but Gold certainly was in a bull trend

2015-2020 same

My understanding is that AU is the traditional hedge against inflation.

Stack those coins in the safe, peeps!

 

[TheDawn]

This instrument seems to be asleep at the wheel.

With inflation weighing in at about 8%, and TIPS bonds paying about 2⅓%. I did the calcuations, and the numbers aren't adding up... maybe one of you can check my math.

Can anyone explain why TIPS bonds aren't covering the inflation rate, when that's their raison d'être; their purpose for existing?

1. https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm#:~:text=Treasury Inflation-Protected Securities, or,original principal, whichever is greater.

Because they don't want to pay more??

 

[SunTrader]

My understanding is that AU is the traditional hedge against inflation.

Stack those coins in the safe, peeps!

"Old wives tale".

But no harm stacking em just like stacking bottles of fine wine, exotic cars, priceless art, and umm baseball cards.

Maybe they keep ahead of inflation. Maybe they just hang with inflation.

Gold has a funny habit of going up fast .... and going down fast.

How to get the timing down is the trick.

 

[Covertibility]

Ibonds should have an 8 handle when the new reset rate is announced next month.

 

[Rickshaw Man]

isn't inflation closer to 13%

Yes, when you remove owner equivalent rent. I think most folks realize the Federal Government is rigging the numbers. My guess is 18% when calculated from the 1980's standard.

 

[nitrene]

Gold is not a direct hedge against inflation. It is a hedge against the stability of Governments. Gold was gaining in the 1930s which is one of the reasons FDR confiscated them (along with devaluing the currency during the sovereign debt crisis after the collapse of the Rothschild superbank Creditanstalt).

 

[tiddlywinks]

https://tipswatch.com/

 

[Millionaire]

My guess is 18% when calculated from the 1980's standard.

These are shadow stat charts, what they do is use the same method the government used to use in the past.

It was 17% in March 2022 using the government's 1980 method.
And 12% if you use the government's 1990 method