Econoday Report: 10-Year TIPS Auction 10, 2008

2008 U.S. Economic Events & Analysis

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10-Year TIPS Auction

Definition
The Treasury sells inflation-indexed securities, also known as TIPS, at regularly scheduled auctions. Competitive bids at these single-price auctions determine the interest rate paid on each issue, which remains fixed. Twenty primary dealers (as of November 30, 2007) are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold, resell, or trade the securities with other firms. The Treasury announces the amount, date and time of the 10-year TIPS auction four times a year: January, April, July and October. The 10-year TIPS are usually announced at the beginning of January and July. The April and October announcement calls for a reopening of the previously issued security. In each of the aforementioned months, 10-year TIPS are auctioned in the second week of the month. These TIPS are issued on the 15th of the month; if it falls on a weekend or holiday, then they are issued (settled) on the next business day. Why Investors Care

Yield Awarded

1.655 %

Highlights
Demand was moderate for the Treasury's 10-year TIPS auction, showing a bid-to-cover ratio of 1.90 for the moderate $8 billion offering. Buy and hold customers such as pension funds and insurance companies showed at best moderate interest as indirect bidders took only 31 percent of the auction, more than 10 percentage points below average. These results suggest there is little concern that inflation will be eroding investments.

Trends

The yield on the 10-year TIPS note hovers near yields of much shorter term notes, reflecting its guarantee against inflation risk.

Data Source: Haver Analytics | Consensus Data Source: Market News International and Thomson Financial

2008 Release Schedule

Released On: 1/10 4/10 7/10 10/8

Released For: Dec Mar Jun Oct