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International Finance Discussion Papers: Tips from Tips: The Informational Content of Treasury Inflation-Protected Security Prices

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International Finance Discussion Papers: Tips from Tips: The Informational Content of Treasury Inflation-Protected Security PricesTIPS breakeven inflation rate, defined as the difference between nominal and TIPS yields of comparable maturities, is potentially useful as a real time measure of market inflation expectations. In this paper, we provide evidence that a fairly large TIPS liquidity premium existed until recently, using a multifactor no arbitrage term structure model estimated with nominal and TIPS yields, inflation and survey forecasts of interest rates. Ignoring the


TIPS breakeven inflation rate, defined as the difference between nominal and TIPS yields of comparable maturities, is potentially useful as a real-time measure of market inflation expectations. In this paper, we provide evidence that a fairly large TIPS liquidity premium existed until recently, using a multifactor no-arbitrage term structure model estimated with nominal and TIPS yields, inflation and survey forecasts of interest rates. Ignoring the TIPS liquidity premiums leads to counterintuitive implications for inflation expectations and inflation risk premium, and produces large pricing errors for TIPS. In contrast, models incorporating a TIPS liquidity factor generate much better fit for these variables and reveal a TIPS liquidity premium that was until recently quite large ( 1%) but has come down in recent years, consistent with the common perception that TIPS market grew and liquidity conditions improved. Our results indicate that after taking proper account of the liquidity conditions in the TIPS market, the movement in TIPS breakeven inflation rate can provide useful information for identifying real yields, expected inflation and inflation risk premium.


Binding Type: Paperback
Publisher: Bibliogov
Published: 02/05/2013
ISBN: 9781288704507
Pages: 74
Weight: 0.33lbs
Size: 9.69h x 7.44w x 0.15d
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SKU: 34708366044

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Delivered in mailbox folded up.
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The tote is beautiful! The only complaint I have is that it was delivered folded up in my mailbox. I’m going to try & use an iron on low heat to straighten it out. It is made out of a cheaper fabric.
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S Gardner
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Size: One Size, Color: Dark Cappuccino, Size: One Size, Color: Dark Cappuccino
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Size: One Size, Color: Dark Cappuccino, Size: One Size, Color: Dark Cappuccino
This purse has a good size for an every day purse. It’s a pretty style purse, and reminds me of the Coach brooklyn shoulder bag. I’m not too crazy about this bag since the material is thin and flimsy, but I should be okay.
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