TIPS Auction Step By Step: Know the Schedule

There will be two auctions for Treasury Inflation Protected Securities (TIPS) in July. I will follow these auctions in a series posts. This is the first post in this series. Other posts in the series include:

• TIPS Auction Step By Step: Read the Announcement
• TIPS Auction Step By Step: Place Order
• TIPS Auction Step By Step: Read the Results

Tentative Auction Schedule. How do you know when they will hold an auction for what? The Treasury Department publishes a tentative auction schedule a few months in advance. Although it is said to be tentative, the schedule is pretty much set once it’s published. I’ve never seen an auction being canceled or moved. The schedule includes auctions for Treasury bills, regular (“nominal”) Treasury notes and bonds and TIPS. The TIPS auctions are shaded in blue so they are easy to spot.

 

There are three dates in the schedule.

1. Announcement Date. The Announcement Date is when they publish a formal announcement. The announcement will contain more detailed information about the bond being auctioned. You can’t place an order until the Announcement Date.

For the next two auctions, we know the Announcement Dates are Monday July 7, 2008 for a 10-year TIPS issue and Thursday July 17, 2008 for a 20-year TIPS issue.

2. Auction Date. The Auction Date is the date when they actually hold the auction. The cutoff time is specified in the announcement, usually around 12:00 p.m. Eastern Time. Your order must be received on or before the auction cutoff time on the Auction Date. If you place order through a brokerage account, the brokerage firm may impose its own cutoff time before the official cutoff time to allow itself time for transmitting your order to the Treasury. For example the current cutoff time at Vanguard Brokerage Service is 9:30 a.m. Eastern Time for online orders or 10:00 a.m. Eastern Time for phone orders. To play it safe, I usually place the order at least one business day before the Auction Date.

For the next two auctions, the actual Auction Dates are Thursday July 10, 2008 for a 10-year TIPS issue and Tuesday July 22, 2008 for a 20-year TIPS issue.

3. Settlement Date. The Settlement Date is the date when you actually pay and receive the bonds. You must have enough cash ready on this date.

For the next two auctions, the Settlement Dates are Tuesday July 15, 2008 for a 10-year TIPS issue and Thursday July 31, 2008 for a 20-year TIPS issue.

Next step: read the announcement on July 7.

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