By David Enna, Tipswatch.com
By the time you read this, I will be arriving in Thessaloniki, Greece, to begin a 3-week jaunt across northern Greece, Albania, and North Macedonia. This is the land of Zeus and Alexander the Great, but also probably the land of lousy internet, at times. We’ll be in some remote places.
So over the next couple weeks, I will be slow to provide updates, approve comments, answer questions, and track trends. I will try when I have time and internet. These weeks shouldn’t be particularly newsy but you never know.
What’s coming up?
Wednesday, Sept. 20: At about 2:05 p.m. ET the Federal Reserve will announce the interest-rate decision of its Open Market Committee. I am expecting interest rates to hold steady and then we will hear Jay Powell say some fairly hawkish things in his press conference. “Future rate increases are still possible.”
It’s possible the Federal Reserve has hit its peak short-term interest rate in the range of 5.25% to 5.50%. The short-term T-bill market has been stable for several weeks, which seems to indicate investors think rates will hold at these levels, possibly for many months.
I won’t be writing about this announcement, but you’ll have hundreds of other sources and opinions to read shortly after 2 p.m.
Thursday, Sept. 21: At 1 p.m. Thursday ET (or 8 p.m. in Greece) the Treasury will announce the result of its 10-year TIPS reopening auction. I have posted a preview of the auction, so read that to learn more. Sometime after the auction, I hope to post an abbreviated article on the results.
FYI, CUSIP 91282CHP9 was trading on the secondary market Monday morning with a real yield of 1.98%, so it was still looking attractive, either as a purchase at auction or on the secondary market this week.
Tuesday, Sept. 26: The Treasury will auction a 2-year Treasury note. The key here will be if the high yield ends up above 5%, which is within 50 basis points of much shorter-term T-bills. This would indicate the market believes interest rates will hold at high levels well into 2024.
There are some good nominal yields out there. In Charlotte, a local credit union is offering an 11-month CD with an annual yield of 6.25%, minimum deposit of $5,000.
Huge news coming in October
As Arnold Schwarzenegger famously said, “I’ll be back.”
I’ll be home in time for the September inflation report, which will be issued at 8:30 a.m. Oct. 12. This is the most important inflation report of the year, because it will:
- Set the new inflation-adjusted variable rate for the U.S. Series I Savings Bond.
- Determine next year’s Social Security COLA.
- Set a path for future Federal Reserve interest rate decisions.
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Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear. Please stay on topic and avoid political tirades.
David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
Treasury Inflation-Protected Securities 
Hi David and welcome back!
What are your thoughts on the current reopening of the 30-year TIPS due in 2053?
Thanks, Mike
I woudn’t be a buyer, mainly because that is out of my hold-to-maturity lifespan. The reopening auction was Aug. 24. The next auction is Oct. 19, a new 5-year TIPS.
It looks like the 10-year TIPS is settling in higher at around 2.0% after Powell’s speech. Probably due to the talk about higher for longer. I think it moved more than the short-term rates.
I had the following takeaways from Powell’s press conference and Summary of Economic Projections (SEP): real yields are going up, inflation is slowly coming down, economy is robust – inspite of a list of headwinds, and the Fed Funds rate will stay higher for longer.
Some of the reasons for real yields going up were given to be the supply of the US treasuries and strong economic growth causing nominal yielsds to go up faster than the inflation coming down.
Although the Fed expects one more 25 basis point increase in rates before the end of the year, the Fed Watch tool shows 28.4% and 39.4% probability of an increase at the November and December Fed meetings, respectively.
Unless econoimic data comes weak, there is a probability of TIPS real rates going up but it is hard to know.
Good summary. I agree with you that future real rates are not predictable with certainty. I’m comfortable buying the 10-year here at real rates above 2%.
Your articles are always insightful and helpful. Enjoy your travels!
RE: The short-term T-bill market has been stable for several weeks, which seems to indicate investors think rates will hold at these levels, possibly for many months.
David,
Can you explain how the investment rate can be identical to three decimal points three auctions in a row?
Click to access R_20230918_1.pdf
Click to access R_20230911_2.pdf
Click to access R_20230905_2.pdf
I have also noticed this for other maturities as well.
Seems like it cant be a coincidence.
Rob
Yes, I’ve noticed it too and it seems to be legit. It looks like the big investors just keep placing the same bids.
I’ve been buying these 26-week bills and noticed this as well. The high rate bid has been 5.300% for each auction. My understanding is the investment rate is just a function of the high rate and duration. If I’m correct, then I think seeing 5.537% investment rate repeated seems much more conspicuous than seeing 5.300% high rate repeated even though they mean the same thing here.
You are not only good at investing wisely but also spending wisely. Not always ez so kudos to you. Have a great trip.