Since many readers are - understandably - reporting insomnia, it's a perfect time to write about TIPS.
Oh good, I hear you yawning already.
Treasury Inflation-Protected Securities (TIPS) are exactly what their acronym describes. They are Treasuries that have an inflation-protection component. You can think of them as government bonds with a COLA (cost of living adjustment).
It could be argued TIPS offer an exceptional value when compared with likely future inflation outcomes.
For example, the 5-year TIPS breakeven inflation rate is currently about 30bps and the 10-year rate is about 75bps.
That means a long-term investor will make money on TIPS - versus Treasuries - if nominal inflation averages more than 0.31% per year for the next five years and more than 0.75% per year over the next decade.
By the by, there's a free positive message hotline Calgary students created, (877) JOY-4ALL. I called. On the Comfort Scale, almost as good as an Andrew Cuomo presser.
Are you asleep yet?
