Investing - Theory, News & General • Re: When do TIPS fall into a low coupon rate?

Rates are determined by supply and demand.

The supply of TIPS is relatively fixed and low. So if demand is high rates go low.

I will further point out that nominal rates were low in the given time period. Thanks to government COVID programs cash was flooding into the market. Nobody knew what yo do with all of that cash. Banks are supposed to invest their deposits in working assets. As such, the Fed has a regulation for the maximum amount of cash a bank can hold. These were waived. I mean, you could get a 30 year mortgage for under 3%.

So rates were low all around.

Could you elaborate on that regulation? I've not run across anything like that in my reading. (I'm not a banking expert.) I can imagine several motivations for wanting banks to not hold too much cash, but I would have thought that likely left to the market more than rising to needing regulations. (This is a side issue, so if you think it best to not pursue in the thread, I'll understand.)

I was in corporate treasury in a bank 5 years ago. This was not my remit - I was doing something more exotic. However it did go off like a thunderbolt bolt in the office.

The social functions of banks is to lend and manage duration risk. This is how money is created and managed. It is why banks get special treatment. The Fed’s regulation books are very thick.

I will point out that this isn’t normally a issue. As you suggest, equity owners do push bank management to leverage up their risky portfolio as safety as they can. This is how you make money. Normally not a issue.

It is a side issue and isn’t. It is illustrative on why TIPS rates were so low. Money was pouring into the system. Normally this would spur inflation. But demand fir money (personal consumption or business capital) was repressed by COVID. Inflation would come later.

Statistics: Posted by alex_686 — Fri Sep 25, 2026 1:28 pm