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10-Yr TIPS Auction  
Released On 3/23/2017 1:00:00 PM For 3/23/2017 1:00:00 PM
Auction Results
Total Amount$11 B 
Coupon Rate0.375% 
Bid/Cover2.23 
Yield Awarded0.466% 

Highlights
Results are mixed for today's 10-year TIPS auction, where coverage, at 2.23, was the softest in a year and the bidding somewhat sloppy, as is usual for inflation protected securities, with the high yield awarded at 0.466 percent coming in about a half of a basis point above the 1:00 bid. End investor demand was very solid, however, as non-dealers took down an impressive 80 percent of the $11 billion offering, a reopening of the TIPS first offered in January. The 0.466 percent high yield was 3 basis points above the first issue rate and the highest awarded at auction for the 10-year TIPS since September. The rate implies a breakeven inflation rate of 1.954 percent.

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. Note the interest rate cannot be negative with the Treasury setting a minimum of 0.125 percent. A group of securities dealers, known as primary dealers, are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold the bills, resell the bills to their clients or trade them with other securities firms. Typically, the New York Fed approves about 20 securities firms to be primary dealers but that number dropped sharply during the 2008 financial crisis as some were merged into other firms or went bankrupt. The Fed has been rebuilding that number regularly and the latest list can be found here. The Treasury announces the amount, date and time of the 10-year TIPS auction six times a year: January, March, May, July, September and November. The 10-year TIPS are usually announced at the beginning of January and July. The March, May, September and November 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 last day of the month; if it falls on a weekend or holiday, then they are issued (settled) on the next business day.  Why Investors Care
 
[Chart]

Data Source: Haver Analytics
 
[Chart]
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
 

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