30-year TIPS auctions at just 1.744% … disappointing?

Fed Chairman Ben Bernanke saved the U.S. Treasury a lot of money with his speech on Wednesday, saying the economy remains weak and the Fed has no plan for a major stimulus program. The stock market took an immediate dive, and that continues today, with the Dow Jones Industrial Average down about 1.25% as of 1 p.m. today.

Against that woeful backdrop, the TIP ETF is up 0.5% today.

And so the Treasury’s reissue of a 30-year TIPS, Cusip 912810QP6, went off without a hitch — for the Treasury, that is. The resulting yield was 1.744%, solidly lower than the 1.85% that looked likely yesterday.

And yes, that is a record low for any 30-year TIPS auction. (A similar reissue last Aug. 23 generated a yield of  1.768%, the previous low.)

Didn’t see that coming …

From the Dow Jones report:

“This represents … the demand for long maturity TIPS, or rather the desire to get out of short maturity TIPS,” said Richard Gilhooly, director of interest rate strategy at TD Securities. “Short TIPS outperformed massively in recent months due to surging oil … now oil is plunging and the exodus from short TIPS is not yet over.”

And Dow Jones on the sharp drop in Treasury yields on Thursday:

Investors’ seemingly insatiable hunger for financial safe havens Thursday dragged two-year Treasury yields near an all-time low and briefly pushed yields on shorter-term bills into negative territory–suggesting buyers were even willing to pay the government to lend it money….

Near the end of the U.S. trading day, two-year yields touched 0.334%–the lowest level this year and close to the all-time low of 0.316%, booked on Nov. 4. …

Thursday afternoon, The Treasury Department sold $7 billion in re-opened 30-year Treasury Inflation Protected Securities at 1.744% amid the strongest demand, a bid-to-cover ratio of 3.02, in the history of 30-year TIPS sales.



About Tipswatch

Author of Tipswatch.com blog, David Enna is a long-time journalist based in Charlotte, N.C. A past winner of two Society of American Business Editors and Writers awards, he has written on real estate and home finance, and was a founding editor of The Charlotte Observer's website.
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2 Responses to 30-year TIPS auctions at just 1.744% … disappointing?

  1. Pingback: Next up: Reissue of a 30-year TIPS on Oct. 20, 2011 | Treasury Inflation-Protected Securities

  2. Pingback: 30-year TIPS auction: Lowest rate in history? | Treasury Inflation-Protected Securities

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