This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Inflation warning: check out the spread between TIPs and Treasuries

Stocks in this article: TIP

By Atlas Capital

The Bureau of Labor Statistics reports that US inflation is relatively moderate, with the latest reading showing a 1.7% increase in the year-over-year Consumer Price Index (CPI). The Federal Reserve continues to flood the economy with freshly printed currency in an effort to jumpstart employment.

The Fed does so under the firm belief that inflation is not a concern; they are still more concerned about deflation. So if inflation worries are so benign, why does the market continue to bid up the price of Treasury Inflation Protected Securities (TIPs)? Why do breakeven yields between TIPs and nominal US Treasuries continue to expand? (See chart below.)

(For a quick refresher on Inflation Protected Securities and breakeven yields, please refer to our earlier writings found on our website.)

In the example above, an investor would need an average annual inflation rate of 2.57% for their 10-year TIP investment to do as well as a basic 10-year Treasury. Two things grasp us as significant when analyzing the graph. First, breakeven yields on 10 year securities have risen from 1.51% to the current 2.57% in the last 2 1/2 years, while inflation has not been a concern.

Second, investors are increasingly willing to accept negative nominal yields on 10-year TIPs in exchange for locking in inflation protection for the next 10 years. We believe the market is simply stating that while current inflation is low, it has a good chance of rising over the next 10 years.

Additionally, the market is not too confident that policy makers, both fiscal and central bank (monetary), have the skills to manage a future economy addicted to fiscal and monetary regimes that are historically unprecedented.

Atlas Capital

Atlas Capital

Atlas Capital Advisors, LLC. is a San Francisco based registered investment adviser serving ultra-high-net-worth individuals. Jonathan Tunney is the Founder

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs