Econoday Report: 10-Year TIPS Auction 12, 2007

2008 Economic Calendar
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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-three primary dealers (as of July 2006) 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

2.749 %

Highlights
Buy-side demand for the Treasury's 10-year TIPS auction was solid, as non-dealers took about 44 percent of the $8 billion offering. But other readings were softer including the high yield of 2.749 percent which was about 1 basis point higher than expected. The bid-to-cover was also on the soft side at 1.97 vs. a long-term average of about 2.20. Treasuries slipped following results of the auction, but today's gains in the stock market may be a factor as funds are being reallocated.

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

2007 Release Schedule

Released On: 1/11 4/12 7/12 10/11

Released For: Jan Apr Jul Oct