Long TIPS Yield 3%. Time to Buy?

Advisor Perspectives

Edward McQuarrie, William Bernstein

Article

13 Pages

The authors argue today’s 3% real yield on long TIPS is historically unusual and increasingly attractive as investment horizons shorten. Their case rests on inflation protection, weak long term real returns from nominal bonds, and the ability of TIPS ladders to secure retirement income.

Key Takeaways

Real yields stand out: Long TIPS currently offer a 3% real yield, versus a 1.4% average real return for developed market government bonds since 1900.
Retirement income advantage: A 30 year TIPS ladder can support a 4.9% real payout, while historical 30/70 portfolios failed half the time at that withdrawal rate.
Time horizon matters: Stocks have rarely returned under 3% real over 30 years, but 20 year periods have fallen below that threshold roughly once per generation.
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