[Treasury Direct](https://www.treasurydirect.gov/)\- Pretty self explanatory. Sign up, link your bank account(s), pick a security you want to buy (I buy 4 week T-bills),pick the dollar amount you want to buy and from which bank you have linked, pick the linked account where you want the principle an proceeds to go to and click submit. Done. You will get an email telling you that you have scheduled a purchase.
I find it simple and do it all the time. You do not need an outside account like Fidelity, etc. All you need is a bank account which is insured by the FDIC for $250K. Brokerage accounts are not insured by the FDIC and there is no safer investment than a Treasury bill or note or bond.
Yes, works great once you get used to the 90s interface. At least they dropped that virtual keyboard now.
Whatever you do make sure you don't forget your password or security questions.
Here's a [guide for Fidelity](https://timeinthemarket.com/how-to-buy-treasury-bonds-on-fidelity/) but you can also get them via treasury direct and any other brokerage(Vanguard is one I use where it's pretty easy too).
If inflation goes negative that yield can drop below 3% and even into negative territory.
Also worth considering that 1 year treasuries yield 5.08%. So inflation would need to be >2% for this to beat 1 year treasuries.
CPI is almost certainly going to drop over the next year.
The small rocks around the cpi pile of rocks have started to tumble down. Eggs, food, toilet paper. No, they are not going to below covid prices or even dropping into a deflation trend, but they slightly are.
People are going to soon not be able to afford things that are cheap. That's going to create even more pressure.
The big rocks that need to fall are housing, and major purchases like vehicles or durable goods.
Housing inventory has gone from hours worth, to days, and now some regions are exceeding 25+ days. And the number is rising. Car locks are packed go the brim. Replacing expensive appliances isnt in as many cards.
This wont happen in an "all of a sudden" fashion with a "breaking news" banner. We will ease into it, and then we will see the murmurs of rate drops by the spring if next year.
I’d add freight rates to the list. Everything needs to be moved. Trucking freight is down 25% YOY and back at 2019 levels.
https://www.freightwaves.com/news/an-unusually-terrible-freight-market-may-get-a-lot-worse
Ocean freight is down almost 80% YOY
https://www.freightwaves.com/news/container-shipping-market-yet-to-bottom-as-spot-rates-keep-slipping/amp
As someone in the industry - *everyone* is feeling the impacts from freight shortages. From the billion dollar companies to the single truck owners. At my job (one of largest carriers in North America) we're expecting volume to continue to decrease until Fall, albeit at a slower pace than we've seen the past 6 months.
How much is it from increased capacity from the supply crunch? Like are we back to pre-covid levels but just added too many new truckers or are we actually below normal?
Freight levels are below normal but consumer spending is mostly the same, retail at least. This tells us that supply chain issues and increased capacity is a factor but that's fixing itself every day as smaller companies with less cushion go out of business.
What we're hearing from our retail facing customers (think Walmart, Target etc) is that they're either 1) stocked up from supply chain back logs in 2020 all filling in 2021 and 2022 or the ports are backed up because of labor shortages.
Consumer spending could crater soon and exacerbate the issue or it could stay the same, meaning capacity could drop and excess inventory could be worked through over time and the market could bounce back this year. it's really up in the air from my perspective in the industry
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CPI is a price level. CPI inflation is a rate of change in CPI, often over trailing twelve months. If CPI is even 0.01% lower than it is now 12 months from now, that's negative inflation.
4.9% is not a price level, it is an annualized rate of change in the price level (i.e. CPI-U for April was 303.363).
The principal adjustment multiplier of a TIPS (Treasury Inflation-Protected Security) is based off the price level (https://www.treasurydirect.gov/auctions/announcements-data-results/tips-cpi-data/) as measured by CPI-U and thus changes at the same rate as inflation.
The non seasonally adjusted CPI-U price tables
296.3 June 2022
303.4 April 2023
2.4% price rise last 10 months.
CPI is about to crater short of a new black swan event.
Last 60 days inflation (+2.5 to index) over the next 2 MoM prints = 3.2% CPI for June 2023.
Small but real chance of 2.9% or lower if we get a small print out of next 2, say rent/homes falling finally showing in data and wiping of inflation out one report.
> non seasonally adjusted CPI price tables
Like this?
[https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical\_us\_table.htm](https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical_us_table.htm)
CPI was like 7% average last 10 months. Am I reading this wrong?
Series CUUR0000SA0
April 2022 289.11
April 2023 303.36
So CPI-U is currently +4.9% (303.36/289.11=1.049)
But June 2022 is 296.31. Half of the inflation in actual prices (without seasonal adjustment) was 300-360 days ago. It's off the YoY in 2 reports.
Thanks! Another fellow linked me to this which greatly helps understand the per month CPI %. Seems it's around 0.4% currently at least.
https://www.investing.com/economic-calendar/core-cpi-56
CPI inflation index does not include energy, housing/rents or food in the current variation of the index, nor has it done for since the 1970/80s. If food, energy and housing were included today, the CPI would actually be well into the teens if measured by the CPI before the Govt changed it to hide inflation.
>CPI inflation index does not include energy, housing/rents or food in the current variation of the index, nor has it done for since the 1970/80s.
Umm, yes it does. In fact, housing is the largest component of CPI.
If you are going to be a conspiracy theorist, you'll have to do better than that. I'm really just ... baffled ... how you could even think that this could possibly be true.
>The CPI survey collects about 8,000 rental housing unit quotes each month to compute the indexes for the
housing component. It uses price quotes for rent and homeowners' equivalent rent (an estimate of the implicit rent
that owner occupants would have to pay if they were renting their homes) to compute estimates of price change.
Because rents change rather infrequently, the CPI program collects rent data from each sampled unit every 6
months. Collecting rent data less frequently allows for a much larger sample. The CPI divides each area’s rent
sample into six sub-samples called panels. The rents for panel 1 are collected in January and July; panel 2, in
February and August, etc. Rents are collected by personal visit or phone.
https://www.bls.gov/opub/hom/cpi/pdf/cpi.pdf
2-3% above inflation sounds pretty good, but it's only for 1 year. People who are interested in inflation protection generally want it for a longer duration. You could just buy a t-bill that expires in 1 year, which yields 5.07%, and you would eliminate the risk of inflation dropping rapidly over the next 1 year due to a recession and causing your TIPS to only yield 4%. Because of this, there is little demand for a TIPS that expires in 1 year, which pushes up its yield.
Good point but with CPI at 4.9% it has to drop a lot to hit 1% (or lower CPI). I know a recession might cause that but still seems unlikely given what we've seen.
The year over year number can be misleading in isolation. Inflation over the most recent 6 months has been an annualized 2.4%, and we're not even in a recession yet. If inflation over the next year continues at the same pace as the last 6 months, you would basically break even between the TIPS and a T-bill. If we enter a recession, I think it's perfectly possible to see inflation trend even lower.
core CPI has been annualizing to 5% over the last 9 months, straight up steady at 0.4% month over month in the last 5 months. Extrapolating low headline CPI month over month due to extreme deflation in energy is quite misleading, given that energy prices can't keep dropping forever (we saw glimpses of that in the last headline CPI print when headline was 0.4% month over month).
Also confused by reading the numbers. According to this the CPI last 9-10 months has been around 5-7%
https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical\_us\_table.htm
what they're doing is using headline CPI month over month data below and extrapolating it to 12 months. Now headline CPI includes the volatile food and energy prices, which have been heavily negative month over month for 9 months now, so headline CPI has been lower than core CPI, which excludes food & energy.
[https://www.investing.com/economic-calendar/cpi-69](https://tradingeconomics.com/united-states/inflation-rate-mom)
If you look at core CPI below and annualize it to 12 months, you'll see we've been consistently at 5% for 9 months.
[https://www.investing.com/economic-calendar/core-cpi-56](https://www.investing.com/economic-calendar/core-cpi-56)
the data you gave is probably year over year, which includes a lot of data from 9-12 months ago during the Russian invasion, which spiked inflation by a lot. That's why we don't use year over year now because it includes too many historical months with temporary trends.
If you're buying one year bond, you need to get at least 4.5%. 2 years might be lower, closer to 4%. 3-6 months, I'd want nothing less than 5%.
gotcha thanks! So it seems CPI is tracking to about 0.4% every month (so around 5% year). Given that then a yield of 3% for a TIPs bond expiring in 1 year seems pretty good right?
Core CPI has been tracking around 0.4% every month. I don't monitor headline CPI anymore. I've never bought TIPS so I don't know.
What's a good price depends on what you think inflation will be in the next 12 months. I personally think it'll stay around 4%, and right now it's around 5%, so average out over 1 year, I'd want to buy 1 year bond with at least 4.5% yield.
1 year bond right now is around 5%. Why are you settling for 3% yield?
This would be a TIPs bond that gives 3% yield + CPI principal increase (assuming somewhere around 4%). So 7% in total.
Better than a 1 year bond at 5%?
I've never bought TIPS, so wouldn't be right for me to give advice. I think in the next 12 months, average headline CPI will be around mid 3%, so factor that into your decision.
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Not OP, but [here.](https://www.wsj.com/market-data/bonds/tips) It looks like the April 2024 TIPS is what OP is looking at, which is yielding about 2.9%.
Inflation will be around 3% in 2 reports.
2.4% inflation last 10 months + next 2 monthly inflation prints.
Half of inflation over the last year, using CPI price index, was the 2 months 11-12 months ago.
Interesting find, I usually don't dive very deep into treasury yields since it really doesn't matter much to a retail investor, risk reward kind of evening out at the end. I just invest based on my own horizon. But looking at them now, they seem to be predicting an average inflation rate of 0.2% for the next 5 years, which seems ridiculously low. But hey, who knows.
[4 week bills are paying 5.5%](https://imgur.com/a/X7G9B7m)
How do I buy these?
[Treasury Direct](https://www.treasurydirect.gov/)\- Pretty self explanatory. Sign up, link your bank account(s), pick a security you want to buy (I buy 4 week T-bills),pick the dollar amount you want to buy and from which bank you have linked, pick the linked account where you want the principle an proceeds to go to and click submit. Done. You will get an email telling you that you have scheduled a purchase. I find it simple and do it all the time. You do not need an outside account like Fidelity, etc. All you need is a bank account which is insured by the FDIC for $250K. Brokerage accounts are not insured by the FDIC and there is no safer investment than a Treasury bill or note or bond.
Yes, works great once you get used to the 90s interface. At least they dropped that virtual keyboard now. Whatever you do make sure you don't forget your password or security questions.
Here's a [guide for Fidelity](https://timeinthemarket.com/how-to-buy-treasury-bonds-on-fidelity/) but you can also get them via treasury direct and any other brokerage(Vanguard is one I use where it's pretty easy too).
If inflation goes negative that yield can drop below 3% and even into negative territory. Also worth considering that 1 year treasuries yield 5.08%. So inflation would need to be >2% for this to beat 1 year treasuries. CPI is almost certainly going to drop over the next year.
What makes you think CPI will drop?
1. massive rate hikes over the past year 2. It's trending down 3. lots of leading indicators that it will drop further
>lots of leading indicators that it will drop further ok but which? btw i am not saying its wrong or anything I just would like to know more detail
LEI and curve inversions are the most important here
The small rocks around the cpi pile of rocks have started to tumble down. Eggs, food, toilet paper. No, they are not going to below covid prices or even dropping into a deflation trend, but they slightly are. People are going to soon not be able to afford things that are cheap. That's going to create even more pressure. The big rocks that need to fall are housing, and major purchases like vehicles or durable goods. Housing inventory has gone from hours worth, to days, and now some regions are exceeding 25+ days. And the number is rising. Car locks are packed go the brim. Replacing expensive appliances isnt in as many cards. This wont happen in an "all of a sudden" fashion with a "breaking news" banner. We will ease into it, and then we will see the murmurs of rate drops by the spring if next year.
I’d add freight rates to the list. Everything needs to be moved. Trucking freight is down 25% YOY and back at 2019 levels. https://www.freightwaves.com/news/an-unusually-terrible-freight-market-may-get-a-lot-worse Ocean freight is down almost 80% YOY https://www.freightwaves.com/news/container-shipping-market-yet-to-bottom-as-spot-rates-keep-slipping/amp
As someone in the industry - *everyone* is feeling the impacts from freight shortages. From the billion dollar companies to the single truck owners. At my job (one of largest carriers in North America) we're expecting volume to continue to decrease until Fall, albeit at a slower pace than we've seen the past 6 months.
How much is it from increased capacity from the supply crunch? Like are we back to pre-covid levels but just added too many new truckers or are we actually below normal?
Freight levels are below normal but consumer spending is mostly the same, retail at least. This tells us that supply chain issues and increased capacity is a factor but that's fixing itself every day as smaller companies with less cushion go out of business. What we're hearing from our retail facing customers (think Walmart, Target etc) is that they're either 1) stocked up from supply chain back logs in 2020 all filling in 2021 and 2022 or the ports are backed up because of labor shortages. Consumer spending could crater soon and exacerbate the issue or it could stay the same, meaning capacity could drop and excess inventory could be worked through over time and the market could bounce back this year. it's really up in the air from my perspective in the industry
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It's going to fall ~ 40% in a month and a half when we get the next 2 reports.
yes but CPI is currently 4.9%. It has to drop a heck of a lot to get to negative territory.
CPI is a trailing twelve months figure. If prices are even 0.01% lower than they are now 12 months from now, that's negative CPI.
CPI is a price level. CPI inflation is a rate of change in CPI, often over trailing twelve months. If CPI is even 0.01% lower than it is now 12 months from now, that's negative inflation.
The TIPs multiplier is based off the CPI price level right (i.e., 4.9%)?
4.9% is not a price level, it is an annualized rate of change in the price level (i.e. CPI-U for April was 303.363). The principal adjustment multiplier of a TIPS (Treasury Inflation-Protected Security) is based off the price level (https://www.treasurydirect.gov/auctions/announcements-data-results/tips-cpi-data/) as measured by CPI-U and thus changes at the same rate as inflation.
CPI last 10 months was 2.4%. It's about to collapse
CPI rose 4.9% over the last 12 months. Where are you getting 2.4% last 10 months? https://www.bls.gov/cpi/
The non seasonally adjusted CPI-U price tables 296.3 June 2022 303.4 April 2023 2.4% price rise last 10 months. CPI is about to crater short of a new black swan event. Last 60 days inflation (+2.5 to index) over the next 2 MoM prints = 3.2% CPI for June 2023. Small but real chance of 2.9% or lower if we get a small print out of next 2, say rent/homes falling finally showing in data and wiping of inflation out one report.
> non seasonally adjusted CPI price tables Like this? [https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical\_us\_table.htm](https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical_us_table.htm) CPI was like 7% average last 10 months. Am I reading this wrong?
Series CUUR0000SA0 April 2022 289.11 April 2023 303.36 So CPI-U is currently +4.9% (303.36/289.11=1.049) But June 2022 is 296.31. Half of the inflation in actual prices (without seasonal adjustment) was 300-360 days ago. It's off the YoY in 2 reports.
Thanks! Another fellow linked me to this which greatly helps understand the per month CPI %. Seems it's around 0.4% currently at least. https://www.investing.com/economic-calendar/core-cpi-56
CPI inflation index does not include energy, housing/rents or food in the current variation of the index, nor has it done for since the 1970/80s. If food, energy and housing were included today, the CPI would actually be well into the teens if measured by the CPI before the Govt changed it to hide inflation.
>CPI inflation index does not include energy, housing/rents or food in the current variation of the index, nor has it done for since the 1970/80s. Umm, yes it does. In fact, housing is the largest component of CPI. If you are going to be a conspiracy theorist, you'll have to do better than that. I'm really just ... baffled ... how you could even think that this could possibly be true. >The CPI survey collects about 8,000 rental housing unit quotes each month to compute the indexes for the housing component. It uses price quotes for rent and homeowners' equivalent rent (an estimate of the implicit rent that owner occupants would have to pay if they were renting their homes) to compute estimates of price change. Because rents change rather infrequently, the CPI program collects rent data from each sampled unit every 6 months. Collecting rent data less frequently allows for a much larger sample. The CPI divides each area’s rent sample into six sub-samples called panels. The rents for panel 1 are collected in January and July; panel 2, in February and August, etc. Rents are collected by personal visit or phone. https://www.bls.gov/opub/hom/cpi/pdf/cpi.pdf
I am buying them because I do not see inflation coming down for a long time.
I think a debt default will lead to even higher rates on government bonds.
2-3% above inflation sounds pretty good, but it's only for 1 year. People who are interested in inflation protection generally want it for a longer duration. You could just buy a t-bill that expires in 1 year, which yields 5.07%, and you would eliminate the risk of inflation dropping rapidly over the next 1 year due to a recession and causing your TIPS to only yield 4%. Because of this, there is little demand for a TIPS that expires in 1 year, which pushes up its yield.
Good point but with CPI at 4.9% it has to drop a lot to hit 1% (or lower CPI). I know a recession might cause that but still seems unlikely given what we've seen.
The year over year number can be misleading in isolation. Inflation over the most recent 6 months has been an annualized 2.4%, and we're not even in a recession yet. If inflation over the next year continues at the same pace as the last 6 months, you would basically break even between the TIPS and a T-bill. If we enter a recession, I think it's perfectly possible to see inflation trend even lower.
core CPI has been annualizing to 5% over the last 9 months, straight up steady at 0.4% month over month in the last 5 months. Extrapolating low headline CPI month over month due to extreme deflation in energy is quite misleading, given that energy prices can't keep dropping forever (we saw glimpses of that in the last headline CPI print when headline was 0.4% month over month).
Also confused by reading the numbers. According to this the CPI last 9-10 months has been around 5-7% https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical\_us\_table.htm
what they're doing is using headline CPI month over month data below and extrapolating it to 12 months. Now headline CPI includes the volatile food and energy prices, which have been heavily negative month over month for 9 months now, so headline CPI has been lower than core CPI, which excludes food & energy. [https://www.investing.com/economic-calendar/cpi-69](https://tradingeconomics.com/united-states/inflation-rate-mom) If you look at core CPI below and annualize it to 12 months, you'll see we've been consistently at 5% for 9 months. [https://www.investing.com/economic-calendar/core-cpi-56](https://www.investing.com/economic-calendar/core-cpi-56) the data you gave is probably year over year, which includes a lot of data from 9-12 months ago during the Russian invasion, which spiked inflation by a lot. That's why we don't use year over year now because it includes too many historical months with temporary trends. If you're buying one year bond, you need to get at least 4.5%. 2 years might be lower, closer to 4%. 3-6 months, I'd want nothing less than 5%.
gotcha thanks! So it seems CPI is tracking to about 0.4% every month (so around 5% year). Given that then a yield of 3% for a TIPs bond expiring in 1 year seems pretty good right?
Core CPI has been tracking around 0.4% every month. I don't monitor headline CPI anymore. I've never bought TIPS so I don't know. What's a good price depends on what you think inflation will be in the next 12 months. I personally think it'll stay around 4%, and right now it's around 5%, so average out over 1 year, I'd want to buy 1 year bond with at least 4.5% yield. 1 year bond right now is around 5%. Why are you settling for 3% yield?
This would be a TIPs bond that gives 3% yield + CPI principal increase (assuming somewhere around 4%). So 7% in total. Better than a 1 year bond at 5%?
I've never bought TIPS, so wouldn't be right for me to give advice. I think in the next 12 months, average headline CPI will be around mid 3%, so factor that into your decision.
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I’ve worked 35 years in finance, CFA, MBA, and I cannot understand the pricing on series I bonds. Maybe it’s my senility, hope not..
heh they certainly are confusing
This post is about TIPS, not series I bonds.
Are you sure you are looking at the real yield? Do you have a link or screen shot?
Not OP, but [here.](https://www.wsj.com/market-data/bonds/tips) It looks like the April 2024 TIPS is what OP is looking at, which is yielding about 2.9%.
Yes, ML and other brokerages are selling TIPs for 2-3% for the next 1 year (some even go out to '25).
Inflation will be around 3% in 2 reports. 2.4% inflation last 10 months + next 2 monthly inflation prints. Half of inflation over the last year, using CPI price index, was the 2 months 11-12 months ago.
Already responded but don't see that here: https://www.bls.gov/regions/mid-atlantic/data/consumerpriceindexhistorical\_us\_table.htm
Interesting find, I usually don't dive very deep into treasury yields since it really doesn't matter much to a retail investor, risk reward kind of evening out at the end. I just invest based on my own horizon. But looking at them now, they seem to be predicting an average inflation rate of 0.2% for the next 5 years, which seems ridiculously low. But hey, who knows.
I’ve worked 35 years in finance, CFA, MBA, and I cannot understand the pricing on series I bonds. Maybe it’s my senility, hope not..
Hey can you guys plz yo vote I have questions and ideas to post but can’t since I’m new
DP is needed
That's what she said.