What Is Up With Real Interest Rates?

Look at the yields on the following TIPS (Treasury Inflation Protected Securities) as of yesterday, as compared with the end of June:

Maturity: 2010 Jan 15
6/30/08 yield
-0.454 %
7/29/08 yield
0.297 %

Maturity: 2011 Jan 15
6/30/08 yield
-0.011 %
7/29/08 yield
0.692 %

Maturity: 2012 Jan 15
6/30/08 yield
0.396 %
7/29/08 yield
0.977

Maturity: 2014 Jan 15
6/30/08 yield
0.844 %
7/29/08 yield
1.326 %

Why were the yields so low in June? Did investors pile into the TIPS, fearing that skyrocketing energy prices signaled a massive increase in future inflation? And then did they jump out of them later in July when energy prices began to subside?

If there were a big changes in expected inflation, you would think that the yields on nominal treasuries would have increased and then decreased. Here are the yields for the corresponding nominal securities with maturities closest to the above TIPS:

Maturity: 2010 Jan 15
6/30/08 yield
2.34 %
7/29/08 yield
2.33 %

Maturity: 2011 Jan 15
6/30/08 yield
2.69 %
7/29/08 yield
2.69 %

Maturity: 2012 Jan 15
6/30/08 yield
3.08 %
7/29/08 yield
3.06 %

Maturity: 2014 Jan 15
6/30/08 yield
3.38 %
7/29/08
3.42 %


Almost no change in the nominal yields! What has happened here? If anyone has an idea, please send me an email.

Source: wsj.com Markets Data Center