10-year TIPS reopening auctions with a yield of 0.315%

A 10-year TIPS reopened today at auction with a yield to maturity of 0.315%, 41 basis points below the yield of this TIPS at the creation auction – just two months ago on Jan. 21.

This is CUSIP 912828N71, a 9-year, 10-month TIPS with a coupon rate of 0.625%, which was set at the January auction. That means today’s buyers had to pay a premium, an adjusted price of $102.67 for $100 of par value. However, that price adds in a slight discount, because this TIPS will have an inflation index of 0.99702 on the March 31 closing.

TIP ETF 1 dayThis was the lowest yield for any 9- to 10-year TIPS auction since March 2015, when a similar 9-year, 10-month TIPS went off with a yield of 0.2%. There have been six auctions of this type since last March.

But the yield was higher than looked likely at mid-morning, when the TIP ETF (one-day chart is show at the right) was rising sharply. At that time, this TIPS was trading on the secondary market with a yield of 0.29% and a cost of about $103.18. But TIPS began losing steam as the day continued, resulting in the slightly higher yield.

Inflation breakeven rate. With a nominal 10-year Treasury currently trading with a yield of 1.90%, this TIPS gets an inflation breakeven rate of 1.58%, which is low but up substantially from the ultra-low 1.30% of the original auction on Jan. 21. This indicates TIPS are gaining favor with investors, at least against nominal Treasurys.

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3 Responses to 10-year TIPS reopening auctions with a yield of 0.315%

  1. Len says:

    If it is this low, or lower, in July I’ll be buying munies. There is a point where the price of an insurance premium departs from reality. As I always like to point out, after taxes you’re guaranteed to not keep pace with inflation at these yields.

  2. jim says:

    Let us know what munis you would buy. I see all these municipalities on the verge of bankruptcy. I’m happy I bought the 30 year TIPS in February, just sold and made a nice little profit for the year.

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