New 10-Year TIPS auctions with a real yield Of 0.045%, lowest in more than 3 years

Summary

  • Coupon rate was set at 0.125%, the lowest the Treasury will go.
  • Buyers had to pay a premium, an adjusted price of about $100.98 for $100 of par value.
  • The inflation breakeven rate came in at 1.54%, historically low and attractive against a nominal Treasury.

The yield ended up being lower than I expected, and it ran counter to a slight decline in the TIP ETF Thursday morning. I was expecting somewhere around 0.14%, so today’s auction indicates there is still strong demand for Treasury Inflation-Protected Securities.

Read my analysis at SeekingAlpha.com

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5 Responses to New 10-Year TIPS auctions with a real yield Of 0.045%, lowest in more than 3 years

  1. ayce57 says:

    why the .98 cent premium ?

  2. tipswatch says:

    Ayce, the premium kicks in because the coupon rate was set at 0.125%, but the auctioned yield was 0.045%. Buyers had to kick in extra money to receive the higher coupon rate for 10 years.

  3. jim says:

    I think the EE bond with the 10k limit is a much better deal than this.

    • tipswatch says:

      Jim, I’d say the I Bond is also a much better deal than a 10-year TIPS. The fixed rate of 0.1% beats the TIPS yield, plus the I Bond has tax advantages and a flexible maturity. The EE Bond is a steal if you are absolutely sure you can hold it 20 years, earning 3.5% versus 1.9% for a 20-year nominal Treasury.

  4. jim says:

    Good point on the i bond. I think I would go with the ee bond first.

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