Could not agree more.The not often recognized huge risk in a TIPS ladder is what the available yield is at the time one is ready and able to invest in the ladder. In the last few years that has flipped from -2% real to +2% real, probably the biggest single change in bond investing over this recent time. A change of 4% in real yield is tremendous. It certainly dwarfs the I bond feeding frenzy for one thing.
Another thing I wonder about - and this is related to what dbr wrote - is how many on here with long TIPS ladders don't feel so great having most or all of their positions in the red... depending on what the real YTM was when they purchased. I know most say that they don't care because they are planning to hold to maturity. But it's just human nature to feel at least a little bit upset if all your positions are down.
All five of my positions from 2025 to 2029 are in the red but I only have a five-year ladder (and I did buy when real rates were at least positive). Those who bought long-dated TIPS when real yields were low or even negative have to be looking at large paper "losses". I guess the question I am really addressing is "How risky is interest-rate risk for a long TIPS ladder?"
Statistics: Posted by AlmstRtrd — Thu Jun 27, 2024 8:19 am — Replies 22 — Views 1181