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| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| More |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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TIPS at a tipping point? Traders say yes
Inflation still AWOL; notes linked to price hikes losing luster |
--Bloomberg News-- Jan. 26, 2011
There has been no better place in the U.S. government bond market since 2008 than in debt that protects against faster inflation. Now, traders say the securities may be poised to fall as consumer prices rise too slowly to justify the gains.
Treasury Inflation-Protected Securities returned 17 percent the last two years, compared with gains of 1.9 percent in Treasuries, Bank of America Merrill Lynch indexes show. Yields on 10-year TIPS show bondholders expect the consumer price index to increase 2.18 percentage points a year on average over the life of the debt. The rate rose 1.5 percent in 2010 and is forecast to climb 1.7 percent this year, based on a Bloomberg survey of more than 60 economists.
“We're nowhere near any inflationary type of levels,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG's private wealth unit in New York. “There's a lot of slack in the U.S. economy, especially in the labor market. It's too soon to get too bullish on TIPS.”
The mismatch in expectations may suggest the portion of the U.S. government bond market established in 1997 as a buffer against inflation may be losing some of its predictive power.
Breakeven Rates
Demand for TIPS has pushed the difference between yields on the debt and non-inflation-linked Treasuries, known as the breakeven rate, as high as 2.42 percentage points this month on 10-year debt, up from 1.47 percentage points in August, on concern that the Federal Reserve's plan to buy $600 billion of Treasuries would spark faster inflation as the central bank prints more cash.
Break-even rates advanced on Jan. 5 to within 21 basis points of the 263 level reached in July 2008 when oil touched a record $147.27 a barrel and as consumer prices rose 5.6 percent, the most since 1990. Crude fell 2.7 percent last week to $89.11.
The break-even rate exceeded the consumer price index by as much as 132 basis points, or 1.32 percentage points. Since 1998, it has averaged 43 basis points less than CPI, according to data compiled by Bloomberg.
“A lot of the fears of the inflation hawks are going to be priced out of the market in the coming months,” said Eric Van Nostrand, a New York-based TIPS strategist at Credit Suisse Group AG.
Bond Auction
The Treasury's sale of a record $13 billion in 10-year notes on Jan. 20 showed waning demand for inflation-linked debt. The auction received the fewest bids per dollar of the debt sold since April 2009, with a 2.37 bid-to-cover ratio. The previous 10 sales had an average 2.73 ratio. The break-rate fell 14 basis points the next day, the biggest drop since May 20.
TIPS pay interest on a principal amount that rises with consumer prices. Their face value is protected against deflation, because the principal can't fall below par.
U.S. inflation-indexed debt has been a sweet spot for government bond investors, with an average annualized 8.2 percent gain the past two years, compared with 1 percent for the whole Treasury market, Merrill Lynch indexes show.
The yield on the 1.25 percent TIPS maturing in July 2020 rose 13 basis points to 1.06 percent last week. At the same time, the yield on the 10-year Treasury note jumped 8 basis points to 3.40 percent, according to BGCantor Market Data.
The TIPS rate was 1.08 percent, and the 10-year Treasury yielded 3.43 percent today as of 10:30 a.m. in London.
For the complete article.
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