The Treasury today is reopening CUSIP 912828WU0 at auction, creating a 9-year, 8-month Treasury Inflation-Protected Security with a coupon rate of 0.125%. Here’s where this auction stands at 10:15 a.m.:
- Bloomberg’s Current Yields page shows this TIPS trading on the secondary market with a yield of 0.490% and a price of about $96.59 per $100 of value. This discount is caused by the 0.125% coupon rate, which was locked in when this TIPS first auctioned in July.
- The Wall Street Journal’s Closing Prices page shows this TIPS ended yesterday with a yield of 0.493% and a price of about $96.10.
- The Treasury’s Real Yields Curve page shows a full-term 10-year TIPS would have yielded 0.53% at the close yesterday.
- The TIP ETF is currently trading at $112.59, up 0.14%, which indicates that yields are slightly declining.
Put this together and you can estimate that today’s auction in going to result in a yield slightly under 0.50%, let’s say 0.49%. With the 10-year nominal Treasury trading today at 2.33%, you’re looking at an inflation breakeven rate of 1.84%. That’s very low, and in the buy range, at least versus a traditional Treasury. You could see a lot of interest in this issue from big-money central bands, hedge-funds, etc., and that would push the yield down.
The auction closes at noon for non-competitive bids (such as those placed at TreasuryDirect and at 1 p.m. for competitive bids. I’ll post again after 1 p.m. with the auction result.