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There was a post in the last few days I meant to print, and didn't. Now I can't find it. (maybe METAR bde.) The post gave an old formula something like: 3.4% + CPI-U = >7 = buy 30 yr. T-bond. 2.3% + CPI-U = < ?? = sell 30 Yr. T-bond.

Does anybody know where this can be found, looks like a quick little tool for measuring where things stand..


Like most quick tools, this is guesswork based on past history.

We looked at "real return" on 10-year Treasuries for the FAQs and going back to 1962, both median and mean was about 2.8%. With the discontinuation and reinvention of 3-year Treasuries it is harder to come up with a number, but 3% average would be ballpark. I think any attempt to project history back before the last Great Depression is even less helpful than these numbers.

For those of us looking at holding to maturity, these numbers at least give of some sense as to when TIPS make sense. When you look at 30 year Treasuries, you definitely would want to be well above historical averages, whether actively trading or just needing to cash in because you are getting old. I know actice traders love buy and sell signals, but it helps at least to know where the numbers come from.
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