U.S. Sale of 30-Year TIPS May Yield 1.463%, Dealer Survey Shows

Feb. 20 (Bloomberg) --The government’s auction of $9 billion of 30-year Treasury Inflation Protected Securities will draw a yield of 1.463 percent, according to the average forecast of seven of the Federal Reserve’s 22 primary dealers in a Bloomberg News survey.

The sale is the 12th long-bond TIPS offering since auctions of the security resumed in February 2010 after the Treasury stopped selling them in 2001. The securities, which mature in February 2044, yielded 1.465 percent in pre-auction trading. Bids are due by 1 p.m. New York time.

The securities yielded 1.33 percent at the last sale, a $7 billion offering on Oct. 24. They drew a record auction low of 0.479 percent at the auction on Oct. 18, 2012.

The last sale’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.76, versus an average of 2.70 at the past 10 auctions.

Indirect bidders, a category of investors that includes foreign central banks, bought 45 percent of the securities at the October sale, higher than the average of 44.5 percent at the past 10 auctions.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 19.1 percent of the securities at the October auction, versus a 17.3 percent average at the past 10 offerings.

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 due in 15 years and longer have returned 3.4 percent this year after losing 19.4 percent in 2013, their worst year on record, according to Bank of America Merrill Lynch’s 15-Plus Year U.S. Inflation-Linked Treasury Index. The broader Treasury market has gained 1.5 percent this year, compared with a 3.4 percent drop in 2013, according to the Merrill Lynch U.S. Treasury Index.

The Fed’s primary dealers trade Treasuries with the central bank and are obligated to participate in U.S. debt 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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