The US Treasury's 10-year TIPS Auction was today and these are the results:
Interest Rate = 2.625%
Yield = 2.749%
Price per $100 = $98.942199
So, my $3,000 TIPS should cost me $2,968.27. I will be paid interest every 6 months, and my principal will be adjusted at the rate of inflation, which means I'll be yielding 2.749% PLUS the inflation adjustments. So hypothetically, if inflation were to hold steady at 3%, my yield would be 5.749%, and of course if inflation goes through the roof my principal would grow in line with inflation. I think that's not too shabby. [Actually, I am really happy with the auction results.]
Hopefully this explains why I like TIPS as an alternative to long-term CDs.
I'll report again when the funds for my TIPS purchase are automatically deducted from my checking account.
Buying a TIPS from Treasury Direct - Part Two
July 12th, 2007 at 10:51 pm
July 13th, 2007 at 12:23 am 1184286180
July 13th, 2007 at 12:38 am 1184287122