Econoday Report: 5-Yr TIPS Auction October 26, 2009

2009 Economic Calendar

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5-Yr TIPS Auction

Released on 10/26/2009 1:00:00 PM For 10/26/2009 1:00:00 PM

Auction Results
Bid/Cover	3.10
Coupon Rate	1.250%
Total Amount	$7
Yield Awarded	0.769%

Highlights
In the final TIPS auction of the year, today's $7 billion 5-year reopening found very strong demand. Coverage. at 3.10, was the best since 2004 and the high rate of 0.769 percent was several basis points lower than expectations. Non-dealer interest was very strong with the group taking down 48 percent of the 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. A group of 17 securities dealers (as of June 18, 2009), known as primary dealers, 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 5-year TIPS auction twice a year - in April and October. The 5-year TIPS are usually announced during the third week of April and auctioned the subsequent week. In October, TIPS are also announced during the third week of the month, but this is typically a reopening of a previously issued security. The 5-year TIPS are issued on the last business day of the month. These securities mature at mid-month; consequently, investors who purchase these securities at auction are required to pay the interest accrued between the 15th of the month and the issue date. Why Investors Care

Data Source: Haver Analytics

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