TIPS Auction on April 12, 2007

The Treasury Department announced today (PDF) there will be an auction for 10-year, or more precisely, 9-year 9-month, Treasury Inflation Protected Securities (TIPS) notes on April 12, 2007. There will be another auction for 5-year TIPS on April 24, 2007. The announcement for the 5-year TIPS auction will come out two weeks from today on April 19. For more information about TIPS notes and how to buy them, see my previous post: TIPS: Inflation Linked Bonds.

The 9-year 9-month TIPS auction on 4/12/07 is a reopening of the 10-year TIPS notes auctioned in January. The notes carry a coupon rate of 2.375%. The current real (after inflation) yield on the market for 10-year TIPS is about 2.2%, down 0.25% since the last auction in January. The market yield for 5-year TIPS is down even more to 2.0%. I will take a pass on both auctions because I purchased twice the amount I would normally purchase in last October’s auction for 5-year TIPS when the yield was about 2.7%. If the yield ever gets above 2.5% again, I will be interested; otherwise I will pass and keep rolling T-Bills.

If you are interested in either auction, you can use my TIPS pricing spreadsheet to estimate the final price.


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