Plunging commodity prices have convinced some traders that inflation is going to be negative for the next 5 years. As a result, the prices of TIPS have plunged, and their real yields have risen. 5-year TIPS being auctioned today will have a real yield that is actually higher than the nominal yield on 5-year Treasuries. The iShares LehmanUS Treasury Inflation Protected Securities Fund (TIP) today is selling at its lowest level (closing price) ever.
With real yields high and expected inflation extremely low, TIPS add up to a very cheap way to buy insurance against inflation.