Last edited Wed Nov 16, 2022, 03:53 PM - Edit history (1)
The title line are the last 4 months (October over June) AT AN ANNUALIZED RATE.
Note also the PPI generally leads the CPI. So that the PPI is 0.06% and Core PPI is 2.5% is a good harbinger for the next CPI report in about a month from now.
So plain old Treasuries might be a better deal than TIPS
(Currently the 5 year treasury is 3.9% and the 10 year treasury is 3.7%. When I bought my TIP on November 9, the 5 year plain old treasury opened at 4.3% and the 10 year at 4.2%. They closed at 3.9% and 3.8% respectively on a rather volatile day. The day after the election)
(As a rule of thumb, plain old treasuries do better than TIPS when inflation falls below expectations).
I still feel good about my TIPs purchase: Roughly speaking, it's rate of return (ROR) is inflation plus 1.9%. Matures in 5.4 years.
Per my spreadsheet:
At 0% inflation, its ROR is 1.86% plus inflation (1.86%).
At 2% inflation, its ROR is 1.90% plus inflation (3.90%).
At 4% inflation, its ROR is 1.93% plus inflation (5.93%).
At 6% inflation, its ROR is 1.97% plus inflation (7.97%).
Actually, for all inflation rates, ROR = 1.0186 * (1+inflation) - 1 ,
e.g. at 6% inflation, ROR = 1.0186*1.06 - 1 = 0.0797 = 7.97%
Had I not built the spreadsheet, I would never have figured that out, despite having read several articles about TIPS.
That 1.86% magic number varies with market conditions (i.e. with interest rate and inflation rate expectations), it's not some universal TIPs constant. (It also depends on time to maturity). Someone who buys this same TIPS today will have a different magic number than what I got on November 9..
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{#} CPI and PPI
CPI https://data.bls.gov/timeseries/CUSR0000SA0
Core CPI http://data.bls.gov/timeseries/CUSR0000SA0L1E
PPI http://data.bls.gov/timeseries/WPSFD4
Core PPI http://data.bls.gov/timeseries/WPSFD49116
The Core CPI is the CPI less food and energy
The Core PPI is the PPI less food, energy, and trade services
CPI = Consumer Price Index,
PPI = Producer Price Index aka wholesale prices
How the 4 month inflation figures were calculated:
https://www.democraticunderground.com/?com=view_post&forum=1002&pid=17358410
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{#} Treasury Interest Rates
10 Year Treasury - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis (DGS10) (FRED)
https://fred.stlouisfed.org/series/DGS10
US Treasury Yield Curve (you can set the date)
https://www.ustreasuryyieldcurve.com/
Select interest rates -- scroll to the Treasury section
https://www.federalreserve.gov/releases/h15/
10-year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity (FRED)
(This has gone negative before every recession. But not every negative occurance has preceded a recession. If I got that right)
https://fred.stlouisfed.org/series/T10Y2Y
Latest quote and recent history graphs of individual treasuries
1mo Treasury https://www.cnbc.com/quotes/US1m
3mo Treasury https://www.cnbc.com/quotes/US3m
2Y Treasury https://www.cnbc.com/quotes/US2Y
5Y Treasury https://www.cnbc.com/quotes/US5Y
10Y Treasury https://www.cnbc.com/quotes/US10Y
20Y Treasury https://www.cnbc.com/quotes/US20y
30Y Treasury https://www.cnbc.com/quotes/US30y
Yahoo Finance symbols for Treasury yields : 3mo: ^IRX, 5y: ^FVX, 10y: ^TNX, 30y: ^TYX (None for 2y)
https://finance.yahoo.com
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