The great thing about investing in treasuries now is that you don’t have to stay awake at night and worry that you might lose
money on your investment. We are now at that no-risk point where we can guarantee that you will lose money on your investment:
The U.S. sold $13 billion of 10-year inflation-indexed notes at a record negative yield with investors willing to pay a premium to guard against the threats of rising consumer prices andEurope’s worsening debt crisis.
The Treasury Inflation Protected Securities were sold at a so-called high yield of negative 0.391 percent, the third consecutive auction where investors paid the government to hold their money. TIPS pay interest at lower rates than regular Treasuries on a principal amount that’s adjusted based on the Labor Department’s consumer price index.
While yields on Treasuries due in 10 years or less are below the pace of inflation, demand is at record highs for U.S. government debt amid competition for a dwindling supply of the safest assets. The International Monetary Fund said last month that the amount of global assets that investors consider “safe” will shrink by $9 trillion by 2016.
“The demand for investors is very strong for both inflation protection and safety,” said Aaron Kohli, an interest-rate strategist at BNP Paribas SA in New York, one of the Federal Reserve’s 21 primary dealers that are required to bid at the auctions. “Cash still needs to be put to work, and investors are looking for any sort of value. TIPS offer that given the strong U.S. fundamentals relative to what else is out there, and all the richness in other safe assets.”