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Laatsch, Francis, 2013, Inflation, hyperinflation, adjustment lags: Why TIPS don't guarantee real rates of return, Journal of Financial Planning 26, 54-59.

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Article

Do Treasury Nominal Securities and Treasury Inflation-Protected Securities Deliver Equivalent Returns?

1School of Business, Indiana University Southeast, New Albany, Indiana, U.S.A

2Department of Economics and Finance, City University of Hong Kong, Kowloon, Hong Kong


Journal of Finance and Economics. 2024, Vol. 12 No. 1, 15-23
DOI: 10.12691/jfe-12-1-2
Copyright © 2024 Science and Education Publishing

Cite this paper:
Yan He, Junbo Wang, Uric Dufrene. Do Treasury Nominal Securities and Treasury Inflation-Protected Securities Deliver Equivalent Returns?. Journal of Finance and Economics. 2024; 12(1):15-23. doi: 10.12691/jfe-12-1-2.

Correspondence to: Yan  He, School of Business, Indiana University Southeast, New Albany, Indiana, U.S.A. Email: yanhe@ius.edu

Abstract

We analyze the investment returns of Treasury Nominal Securities (TNS) and Treasury Inflation-Protected Securities (TIPS) of the U.S. from January 2003 to December 2021. We find that the month-by-month rolling investments in 5-year TNS and TIPS create similar returns, in line with the equivalence between the month-by-month rolling 5-year breakeven (BE) and Consumer Price Index for all urban consumers (CPIU) inflation rates. However, the rolling investments in 10-year TNS generate significantly higher returns than those in 10-year TIPS, consistent with the rolling 10-year BE inflation rates significantly exceeding their respective CPIU counterparts.

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