2017 Economic Calendar
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30-Yr TIPS Auction  
Released On 2/16/2017 1:00:00 PM For 2/16/2017 1:00:00 PM
Auction Results
Total Amount$7 B 
Bid/Cover2.25 
30-Year TIPS Auction Rate0.923% 

Highlights
Results are soft for today's 30-year TIPS auction, where coverage, at 2.25, was the second lowest in 8 years and the bidding sloppy, pushing the high yield awarded 0.923 percent more than 3 basis points above the 1:00 bid. Despite the weakness, end investor demand for the inflation protected securities was about average judging by the allotment share, with non-dealers taking down 76 percent of the $7 billion offering. The 0.923 percent high yield was 25.7 basis points above the prior auction high yield. With the regular 30-year bond trading at around 3.046 percent on the secondary market at the time of the auction, the high yield awarded on the TIPS bond implies that market participants are pricing in an inflation rate of 2.123 percent over the next 30 years.

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 usually announces the amount, date and time of the 30-year TIPS auction in mid-February. The Treasury has not been consistent with reopening dates with recent reopening announcements ranging from mid-August to mid-October. In original issues and reopenings, 30-year TIPS are usually auctioned in the last week of the month. These TIPS are issued (settled) on the last business day of the month. These TIPS, however, have a mid-month maturity date. 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
 

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