10-year TIPS auctions at -0.046%, a record low

The Treasury today announced that its new issue 10-year Treasury Inflation-Protected Security, CUSIP 912828SA9, auctioned at a yield to maturity of -0.046%, the lowest rate ever for a 10-year TIPS and the first-ever negative yield for a 10-year TIPS.

As expected the TIPS has a coupon rate of 0.125%, meaning that buyers of this new issue will need to ‘pay up’ — about $101.66 for each $100 to produce the effective yield of -0.046%. This TIPS matures Jan. 15, 2022.

The previous record low for a 10-year TIPS new issue was 0.639% for the security auctioned  July 21, 2011. That is the only other new issue that has ever gone below 1% yield to maturity.

(The principal balance of a TIPS issue continues to grow with inflation until maturity. In effect, buyers of today’s new issue were accepting the rate of inflation minus 0.046% for 10 years. Keep in mind that a traditional 10-year Treasury is paying 2.01% today, meaning that inflation would have to run just 2.056% over the next 10 years to make this TIPS attractive versus the traditional 10-year. It’s a reasonable conclusion.)

Reaction to the auction, reported by Bloomberg:

“You’re losing purchasing power for the privilege of lending to the U.S. government,” said Eric Van Nostrand, an interest-rate strategist in New York at primary dealer Credit Suisse Group AG. “The success of this auction suggests demand for TIPS remains strong.”


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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5 Responses to 10-year TIPS auctions at -0.046%, a record low

  1. Pingback: Next TIPS auction: 10-year reissue on May 17, 2012 | Treasury Inflation-Protected Securities

  2. Pingback: Despite Treasury slump, will 10-year TIPS auction at all-time low? | Treasury Inflation-Protected Securities

  3. Pingback: Coming March 22: Auction to reissue 10-year TIPS | Treasury Inflation-Protected Securities

  4. tipswatch says:

    Matt, I sat this one out. The auction went pretty well for buyers, just slightly negative to inflation. I agree that the inflation will probably make this a sensible investment versus the alternatives. I had a TIPS mature on Jan. 15, but that money will be reinvested into I Bonds.

  5. Matt poskonka says:

    Well, I bought some. Figure that inflation will provide a good return even with a small negative yield.
    Did you buy any?

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