Bloomberg News

U.S. 10-Year TIPS May Yield 0.060% at Auction, Survey Shows

November 18, 2011

Nov. 17 (Bloomberg) -- The Treasury Department’s $11 billion sale of 10-year inflation-indexed securities may draw a yield of 0.060 percent, according to the average forecast in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers.

The Treasury Inflation Protected Securities mature in July 2021. The current 10-year TIPS yielded 0.040 percent in pre- auction trading. Bids are due by 1 p.m. New York time.

The last offering of 10-year TIPS, an $11 billion sale on Sept. 22, drew a record-low yield of 0.078 percent. The bid-to- cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.61, versus 2.62 at the previous auction in July, and an average of 2.79 for the past 10 sales.

Indirect bidders, a class of investors that includes foreign central banks, purchased 30.4 percent of the securities at September’s auction, compared with 41.6 percent at the July sale. The average for the past 10 offerings is 41 percent.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, bought a record 35.7 percent of the notes at the September sale, versus 13.7 percent in July and an average of 8.2 percent at the past 10 auctions.

The sale will result in a net pay-down of $51.4 billion as $62.4 billion of maturing securities are held by the public and the Fed, including $57.4 billion by the public and $5 billion by the central bank, according to Treasury data.

Inflation-indexed notes pay interest at lower rates than nominal Treasuries on a principal amount that’s linked to the Labor Department’s consumer price index.

Primary dealers trade government securities with the central bank and are obligated to participate in Treasury auctions.

The auction today is the Treasury’s only offering of notes or bonds this week.

--Editors: Paul Cox, Ken Pringle

To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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