U.S. TIPS yields climb as inflation fears lift long-dated bond appeal

Traders Union
All News
Business & Wealth
U.S. TIPS yields climb on inflation

Highlights

10-year TIPS yield reached 2.42%, highest since October 2023, while 30-year TIPS surpassed 2.97%, the most since November 2008, amid revived inflation fears.
Brent crude oil futures climbed over 14% for the week, fueling increased inflation expectations and boosting demand for long-dated Treasury inflation-protected securities.
Despite near-3% yields on 30-year TIPS, advisers caution that significant interest rate risk and market volatility remain, with 10-year Treasury yields stable at 4.25% to 4.75%.

Long-dated TIPS yields reach multiyear highs

As reported by CNBC, long-dated Treasury inflation-protected securities saw yields jump last week as the U.S. launched a series of attacks against Iran, lifting oil prices and reviving investor concerns about inflation. Tradeweb data cited in the report show the 10-year TIPS yield topped 2.42%, its highest level since October 2023, while the 30-year TIPS surpassed 2.97%, its highest since late November 2008.

International Brent crude oil futures rose more than 14% on the week, extending a run of gains that helped push inflation expectations higher. TIPS pay interest twice a year, and their principal adjusts over time based on the Consumer Price Index for All Urban Consumers, with investors receiving either the inflation-adjusted principal or the original amount at maturity.

Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research, says yields across TIPS maturities are rising, with long-dated bonds drawing the most attention. He says a 30-year TIPS yield near 3%, combined with inflation running at about 3%, could imply a nominal annualized return near 6%, putting it not far below nominal equity returns.

Portfolio role and rate risk remain key considerations

Advisers say the higher yields do not remove the trade-off facing investors, because longer-maturity TIPS remain sensitive to changes in interest rates. Matt Wrzesniewsky, head of fixed income client portfolio management at Vanguard, says investors may see attractive lock-in value and potential mispricing in inflation protection, but they still face volatility and substantial interest rate risk.

TIPS are generally presented as a small part of a diversified fixed income allocation rather than a dominant holding. Wrzesniewsky says broader bond market conditions remain relatively contained, with investment grade credit spreads staying between 70 and 90 basis points and the 10-year Treasury yield holding in a 4.25% to 4.75% range, helping support portfolio income and resilience.

Retail investors can buy TIPS directly through TreasuryDirect in 5-year, 10-year or 30-year maturities, with minimum purchases of $100. Investors can also build a laddered portfolio with different maturities or use exchange-traded funds such as the Vanguard Short-Term Inflation-Protected Securities ETF, although ETF prices still fluctuate because the funds do not have a fixed maturity date.

Our earlier article looked at how rising tensions involving Iran and the Houthis were stress-testing the U.S. energy system during peak summer demand. It highlighted key real-time indicators—crude and gas output, refinery runs, fuel inventories, power generation and storage—to gauge whether the U.S. could absorb external shocks without running with thinner spare capacity.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.