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5-Yr TIPS Auction  
Released On 4/19/2018 1:00:00 PM For 4/19/2018 1:00:00 PM
Auction Results
Total Amount$16 B 
Coupon Rate0.625% 
Bid/Cover2.55 
Yield Awarded0.631% 
CUSIP Number9128284H0 
Originally Announced CUSIP9128284H0 

Highlights
Results are on the soft side for today's 5-year TIPS auction, where coverage, at 2.55, was slightly below the long-term average and demand from end investors for the inflation protected securities was the weakest since August 2016, with non-dealers taking down 77 percent of the $16 billion offering. The awarded high yield, at 0.631 percent, was the highest since October 2009, and implies a breakeven annual inflation rate over the next 5 years of 2.13 percent.

Definition
The Treasury sells Treasury Inflation-Protected 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 securities dealers, known as primary dealers, are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold the TIPS, resell them 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 5-year TIPS auction three times a year – a first issue in April, and reopenings of this issue in August and December. In each of these months, the 5-year TIPS are usually announced during the third week and auctioned the subsequent week. The 5-year TIPS are issued (settled) 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
 
[Chart]

Data Source: Haver Analytics
 
[Chart]
The auction rate for the 5-year TIPS auction may be negative, but TIPS coupons have a minimum floor of plus 0.125 percent. This chart shows the high yield awarded at 5-year TIPS auctions from October 2006 up to and including the latest auction results.
Data Source: Haver Analytics
 

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