Summary

• The result, which dipped below recent market indicators, was the second-lowest real yield for any TIPS auction of this term.
• Investors had to pay a sizable premium for this TIPS, about 7.5% above par value, to collect a coupon rate of 0.125% (plus future inflation accruals).
• The inflation breakeven rate climbed to 1.69%. TIPS real yields have been declining at the same time nominal yields are rising.

The Treasury’s offering of $17 billion in a new five-year Treasury Inflation-Protected Security – CUSIP 91282CAQ4 – auctioned Thursday with a real yield to maturity of -1.32%, lower than expected by about 10 basis points.

That real yield (meaning the yield after inflation is calculated in) is the second lowest in the history of TIPS auctions of this term. The lowest ever was -1.496%, set by a reopening auction on Dec. 20, 2012.

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