U.S. 10-Year TIPS Sale May Yield Negative 0.603%, Survey Shows

The government’s $13 billion auction of 10-year inflation-indexed notes may draw a yield of negative 0.603 percent, according to the average forecast in a Bloomberg News survey of nine of the Federal Reserve’s 21 primary dealers.

The Treasury Inflation Protected Securities, which mature in January 2023, yielded negative 0.610 percent in trading before the auction. Bids are due by 1 p.m. New York time.

The last offering of 10-year TIPS, a $15 billion sale on Jan. 24, drew a yield of negative 0.63 percent, the seventh consecutive time an auction of the securities yielded less than zero. The record auction low of negative 0.75 percent was reached on Sept. 20.

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

The January sale’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.71, versus an average of 2.68 for the past 10 sales.

Indirect bidders, a category of investor that includes foreign central banks, bought 53.3 percent of the securities at the January auction, compared with 48.3 percent at the November sale. The average for the past 10 offerings is 43.5 percent.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, bought 11.3 percent of the notes at the last sale, versus 10.4 percent in November and an average of 15.6 percent at the past 10 auctions.

TIPS Returns

U.S. inflation-linked debt maturing in 10 or more years returned 11.8 percent last year, compared with a 7.3 percent gain in the broader TIPS market and a 2.2 percent advance in the overall Treasury market, according to Bank of America Merrill Lynch indexes.

This year, longer-term inflation-protected Treasuries have lost 3 percent, while all TIPS have fallen 1 percent. That compares with a negative 0.6 percent for regular U.S. government debt, the indexes show.

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

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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