Monday, August 5, 2013

19-Year TIPS Trading Update

Click to enlarge.

The solid blue line shows the median over the period that it covers (mid 2004 through 2008). Both the solid red line and the solid orange line show the linear trends over the periods that they cover. All ghost lines are extrapolations forward of their solid versions.

Linear trend failures abound, mostly to the downside (with one notable exception recently).

Click to enlarge.

I am not experiencing buyer's remorse over the 19-year TIPS purchase on June 20th. It seemed like a relatively good long-term opportunity at the time and it still does.

Since I fully intend to hold to maturity, I doubt I will ever experience remorse (barring a complete financial collapse or hyperinflation, neither of which I am predicting over the life of the bond). That would be true even if real rates were to rise from here over the long-term. In fact, I root for higher rates so that I can repeat the process with the interest this particular bond generates. And what is the process of which I speak?

This 19-year TIPS was purchased using the accumulated interest of the 29-year TIPS purchase that I made in 2011. Not surprisingly, I have experienced no buyer's remorse over that purchase either, much to the dismay of Jeremy Siegel.

Source Data:
St. Louis Fed: 20-Year Treasury Inflation-Indexed Security, Constant Maturity
St. Louis Fed: Daily Real Yield Curve Rates

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