TIPS are now Negative

Treassury Inflation Protected Security (TIPS),securities whose principal is tied to the Consumer Price Index (CPI) due in June 2012 are now Yielding negative.

This means that investors are willing to take a negative real return in exchange for the (ahem) security of owning dollars.

Liquidity has dried up all over the world to such an extent that investors are willing to pay a huge "liquidity premium" (meaning, they can dump their TIPS whenever they want), that's greater than the real return of the bond.




Chart courtesy of crossingwallstreet.com