10-year TIPS available Thursday, October 11

Tuesday, October 9th, 2007
Categorized as: Yesterday's News (old post archive)

The Treasury announced today it will re-open July’s 10-year TIPS at auction on Thursday, October 11. This provides investors an opportunity to invest in these TIPS for the nine years and nine months remaining in their term.

Like Series I Savings Bonds, TIPS are a Treasury-issued inflation-protected security. Among their many differences, TIPS typically have a higher base interest rate than I bonds.

These 10-year TIPS have a coupon interest rate of 2.625%. However, the market rate on 10-year TIPS is currently below 2.5%. If those rates hold, the final price on these TIPS will be more than their $1,000 nominal value. Daily Treasury Real Yield Curve Rates is a web page the Treasury updates daily with current calculated yields for specific TIPS terms.

To purchase TIPS at the auction, log on to your TreasuryDirect account and place an order before Monday. TIPS are available in $1,000 increments.

As a TreasuryDirect investor, you won’t actually place an auction bid. Large financial institutions do that outside of TreasuryDirect. However, you will receive the amount of TIPS you order at the best price awarded in the auction. The actual price, yield, and rate of the investment won’t be known until after the auction.

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FDIC Insured Certificates of Deposit can pay 1 or 2% more than savings bonds when held for a similar length of time. See top CD Rates Below:


On October 10th, 2007 Dale said:

So the coupon interest rate is what you get periodically (and pay taxes upon now), and the yield that’s on the treasury dot gov site is calculated from the price someone paid versus the final value of the bond?

So does that mean I can simply add the two numbers together (2.625 + 2.33 = 4.955) to get what I might compare to the Series I bond (3.74)?

On October 11th, 2007 Tom Adams said:

Hi Dale – it’s more complicated that than. First, if you want to compare rates, just compare the fixed rate portions of TIPS and I bonds – both earn the same CPI rate on top of that. The I bond fixed rate is currently 1.3%, the TIPS rate won’t be known until after the auction, but will likely be at least 1 percentage point above that.

As for taxes, with TIPS the 1099-INT you get each year includes both the interest payments and the CPI adjustments.

You also need to be aware that if you need to redeem before the TIPS matures, you can get back less than you invested. When interest rates go up, TIPS values go down, and vice-versa. I bond values never go down.

Tom Adams

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June 1, 2010

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