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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Re: Flat TIPS Date: 12/21/2005 11:29 AM
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Loki, I keep thinking about Greenspan warning that this is an era where investors are only demanding a very low risk premium...and that previous comparable eras ended badly. Because of this, I wouldn't buy a 10-year TIPS. What if "something" happens (no surprise -- something always happens, eventually), and the risk premium rises above the historic average? Based on a graph that you shared with us, a few weeks ago, 2% does seem to be the average.

I am thinking of buying 5-year TIPS, in my IRA, at the next Treasury auction (which is in April 2006).

Would the coupon reflect the current yield (2.15%)? Or, would they issue TIPS with the coupon of 0.875%, and the yield be adjusted by the auction price?

What is the chance that the yield would be lower, at the auction, compared with secondary-market TIPS?

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