The Treasury later today will announce it is reopening CUSIP 912828WU0 at auction Nov. 20, creating a 9-year, 8-month Treasury Inflation-Protected Security with a coupon rate of 0.125%. Update: Here’s the announcement. This TIPS has a history:
- It was first auctioned July 24, 2014, with a yield of 0.249% (plus inflation), just below the mark that would have set the coupon rate at 0.250%. So it ended up with the lowest possible coupon rate, 0.125%.
- It was reissued Sept. 18, 2014, with a yield of 0.610%. Buyers at that auction – I was among them – got this TIPS at a big discount – about $95.72 per $100 of value.
Because it trades on the secondary market, we can track the current pricing for this TIPS, from our usual reference sources:
- Bloomberg’s Current Yields chart shows it trading with a yield of 0.43% and a price of about $97.03 per $100 of value.
- Wall Street Journal’s Closing Prices Chart shows it closed yesterday with a yield of 0.416%.
- The Treasury’s Real Yields chart estimates that a full-term 10-year TIPS would auction today with a yield of 0.46% (a full-term TIPS would generate a slightly higher yield, so this looks accurate.)
As I noted, I was a buyer of this TIPS back in September because its yield made a bold move higher in the days before the auction. A few days before the auction, the TIPS was yielding 0.46%, about where it is today. But on Sept. 17, the day before the auction, August inflation came in a -0.2%, setting off deflation fears and roiling the TIPS market.
Yields rose 15 basis points, and I bought. (But I was expecting a yield of about 0.55%, not the resulting 0.610%. I’ll take every basis point I can get.)
I probably won’t be a buyer at next Thursday’s auction, but a lot can happen in a week. The October inflation report will be issued Thursday morning at 8:30 a.m. That should make things interesting.
I’ll be checking in on this auction next Thursday morning, along with the inflation numbers for October. Meanwhile, study this chart of all 9- to 10-year TIPS auctions since 2008: