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.”

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

  1. 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?

  2. 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.

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

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

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

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