Surprise: A TIPS auction without a record-low yield

I was on vacation last week and away from computers and the Internet (mostly), so I didn’t get a chance to write about Wednesday’s reissue auction of CUSIP 912828TE0, effectively creating a 9-year 8-month TIPS.

Read the Treasury’s announcement.

Demand for this issue was relatively weak, resulting in a yield to maturity of -0.720%, just above the record low yield for a 10-year Treasury Inflation-Protected Security, which is -0.750%, set by this same TIPS was it was reissued in September. A week ago, it looked like this reissue would generate at yield of about -0.83%. Just before the auction, experts were predicted a yield of 0.746%.

That’s significant. We’ve been waiting to see the yield on TIPS, which has been plummeting for about 18 months, start to bottom, or even rise. There’s no reason to say we’ve hit bottom yet, but this auction wasn’t a record low and that is a milestone.

Since January 2011, there have been twelve 10-year TIPS issues and reissues, and the yield has declined in ten of those auctions. A chart:

10-year tips auctions

 

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One Response to Surprise: A TIPS auction without a record-low yield

  1. joe says:

    Could you do an article looking at the April 2013, which now has a positive yield, of about .4% on Fidelity the last time I checked. It seems like a good place to keep short term money as long as there is no deflation. Awesome articles by the way. Whoever was smart enough to buy the TIPS in 1998 seems to have gotten the second best investment behind gold coins.

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