Quote:
Originally Posted by TheMentat
The problem with waiting is that these securities tend to be priced according to EXPECTED future inflation and interest rates. I suspect that prices on TIPS will have spiked long before it becomes generally accepted that inflation has taken hold. If you buy after prices have spiked, you will simply earn a lousy yield, unless inflation is higher than expected.
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I must be missing something...
Why is the price of the bond moving so much if the coupon is moving at the same time? Is it not true that the interest rate on TIPS bought 4 years ago will be the same as what TIPS are currently being issued at? I mean if all the TIPS are following the same inflation index shouldn't they all be paying the same interst rate no matter when they were issued?
What am I missing?