Update: the analysis below implies that summing two Treasury yields allows you to earn the summed yield. In fact, that’s not possible. Rather, the point of the article is that summing the two yields offers a timing signal for identifying relatively high payout rates for a strategy of holding a 50-50 mix of TIPS and conventional Treasuries. Apologies for any confusion. –JP
The recent rise in real yields for inflation-indexed Treasuries (TIPS) looks compelling for locking in relatively attractive payout rates, but the usual risks with bonds still applies. That inspires looking at a somewhat unorthodox strategy of holding TIPS and conventional Treasuries as a hedging strategy.
