This is the auction of CUSIP 912828C99, creating a 4-year, 4-month Treasury Inflation-Protected Security with a coupon rate of 0.125%. Non-competitive bids must be placed before noon. Here is what we know as of 10:05 a.m.:

• Bloomberg’s Current Yields page shows this TIPS trading with a yield to maturity of 0.36% and a price of $99 for $100 of value. (But this price does not include about 1.3% of inflation appreciation that will be figured into the final cost.)
• The Wall Street Journal’s Closing Prices page shows this TIPS – which matures in April 2019 – closed Wednesday with a yield to maturity of 0.294%.
• The Treasury’s Real Yields Curve page estimates that a full-term 5-year TIPS would have yielded 0.39%.
• The broad TIPS ETF (ticker TIP) is trading down 0.43% this morning at $112.02, indicating that TIPS yields are on the rise today.

I’d say it’s going to be pretty hard to predict the auction yield for CUSIP 912828C99. Yesterday’s deflationary inflation report could have dampened demand for a short-term TIPS. Non-seasonally adjusted CPI fell 0.54% last month, and that drop will be factored into this TIPS’ built-up principal (it has eight months of history). So buyers will pay for inflation appreciation that they will quickly lose.

However, sharply falling gasoline prices have a way of turning around quickly. When that happens, this TIPS will earn back its inflation appreciation.

I would guess this one is going to auction with a yield of about 0.37% and an adjusted price slightly above par, when inflation appreciation is factored in.

• Update: This auction resulted in a yield of 0.395% and an adjusted price of $100.17.

The inflation breakeven rate – versus a nominal 5-year Treasury – is going to come in about 1.29%, which I consider very attractive.

Even if inflation averages 1.5% over the next five years, this TIPS will out-perform a 5-year Treasury and most 5-year bank CDs. I will be a buyer.

I’ll report the results of the auction soon after it closes at 1 p.m., and then return later with market reaction.