The Treasury has posted the results of today’s auction of a new 30-year Treasury Inflation-Protected Security, with the auction generating a yield to maturity of 0.770%. This is CUSIP 912810QV3 and it will have a coupon rate of 0.750%, meaning that buyers are getting it at a slight discount, about $99.34 for each $100 purchased.
The yield to maturity of 0.77% is the lowest in the history of 30-year TIPS auctions and reissues. But it was an improvement over the expected rate, which in recent days looked like it could dip to about 0.65%. The previous low was 0.999% for a reissue in October 2011.
Commentary on the auction, from Cynthia Lin of Dow Jones:
… The government attracted only tepid interest at its 30-year inflation-protected bond sale. The $9 billion offering booked a bid-to-cover ratio of 2.46, the weakest level since sales of this maturity were reintroduced in 2010.
Bloomberg‘s Cordell Eddings tied the weak demand to the record-low yield, a huge factor for investors in a 30-year bond:
Demand declined at the Treasury’s auction of $9 billion in inflation-indexed bonds as investors balk at yields at record lows. … “It’s was a rough auction and there is no way around it,” said Michael Pond, co-head of interest-rate strategy in New York at Barclays plc, a primary dealer. “Investors just have a lower appetite for real yields as low as they are that far out the curve.”
The reaction of the TIP ETF demonstrates that the auction was a ‘downer,’ which is actually a good thing for buyers of this issue (defying expectations, they got a 10-basis point boost in yield over 30 years.)