10-year TIPS rates dip below zero for first time

Saturday, August 13th, 2011
Categorized as: TIPSUS Credit Rating

After last weekend’s S&P downgrade of U.S. credit, one would expect the interest rate on government financial instruments to rise to cover the added risk. Instead rates fell, with 10-year TIPS rates dipping below zero for the first time ever on Wednesday, Aug 10 and ending the week at -0.02%.

Note that although the fixed rate on Series I Savings Bonds is zero, it is now higher than the 10-year TIPS rate. Normally the I bond fixed rate is about 1 percentage point lower than the 10-year rate. This makes the I bond an exceptionally good deal for now.

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