Treasury 10-Year TIPS Sale May Yield 0.590%, Dealer Survey Shows

The government’s auction of $13 billion of 10-year inflation-indexed notes may draw yield of 0.590 percent, according to the average forecast of five of the Federal Reserve’s 21 primary dealers in a Bloomberg News survey.

The Treasury Inflation Protected Securities, which mature in July 2023, yielded 0.60 percent in pre-auction trading. Bids are due by 1 p.m. New York time.

The securities yielded 0.5 percent on Sept. 19 at the previous sale, while the July sale drew a yield of 0.38 percent, the first positive yielding auction since November 2011. The securities yielded a record low of negative 0.75 percent in September 2012.

The September sale’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.38, versus an average of 2.61 at the previous 10 auctions.

Indirect bidders, a category of investors that includes foreign central banks, bought 53.8 percent of the securities at the September sale, compared to an average of 50 percent at the past 10 sales.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 1.6 percent of the securities at the September sale, versus a 10.8 percent average at the past 10 auctions.

The sale will raise all new cash, as no securities corresponding with the sale are maturing. 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 8.4 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 2.6 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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