Bloomberg News

U.S. Sale of 30-Year TIPS May Yield 1.423%, Dealer Survey Shows

June 20, 2013

The government’s auction of $7 billion of 30-year Treasury Inflation Protected Securities will draw yield of 1.423 percent, according to the average forecast of six of the Federal Reserve’s 21 primary dealers in a Bloomberg News survey.

The sale is the 10th 30-year TIPS offering since auctions of the security resumed in February 2010 after the Treasury stopped selling them in 2001. The bonds, which mature in February 2043, yielded 1.395 percent in pre-auction trading. Bids are due by 1 p.m. New York time.

The securities yielded 0.639 percent on Feb. 21 at the last sale after drawing a record auction low of 0.479 percent at the Oct. 18 offering.

The February sale’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.47, versus an average of 2.69 at the nine auctions since 2010.

Indirect bidders, a category of investors that includes foreign central banks, bought 54.5 percent of the securities at the February sale, higher than the average of 42.4 percent at the past nine auctions.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 14 percent of the securities at the February sale, versus a 17.7 percent average at the past nine auctions.

The sale will raise $7 billion of new cash, as the public holds no maturing securities, according to the Treasury.

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.

TIPS have lost 6.9 percent this year after returning 7.3 percent in 2012, according to Bank of America Merrill Lynch’s U.S. Inflation-Linked Treasury Index. The broader Treasury market has fallen 1.9 percent this year, compared with a 2.2 percent gain in 2012, the indexes show.

The Fed’s primary dealers trade Treasuries with the central bank and are obligated to participate in Treasury sales.

To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net;

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


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