The government’s $13 billion auction of 10-year inflation-indexed notes may draw a yield of negative 0.746 percent, according to the average forecast in a Bloomberg News survey of eight of the Federal Reserve’s 21 primary dealers.
The Treasury Inflation Protected Securities, which mature in July 2022, yielded negative 0.769 percent in trading before the auction. Bids are due by 11:30 a.m. New York time.
The last offering of 10-year TIPS, a $13 billion sale on Sept. 20, drew a record low yield of negative 0.75 percent, the fifth consecutive time an auction of the securities yielded less than zero.
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 September sale’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.36, the lowest since April 2009 and compared with an average of 2.72 for the past 10 sales.
Indirect bidders, a category of investors that includes foreign central banks, bought 43.8 percent of the securities at the September auction, compared with 44 percent at the July sale. The average for the past 10 offerings is 40 percent.
Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, bought 7.7 percent of the notes at the last sale, versus 16 percent in July and an average of 14 percent at the past 10 auctions.
U.S. inflation-linked debt maturing in 10 or more years has returned 12 percent this year, compared with a 7.2 percent gain in the broader TIPS market and a 2.4 percent advance in the overall Treasury market, according to Bank of America Merrill Lynch indexes.
The auction is the Treasury’s only offering of notes or bonds this week. It will raise $13 billion of new cash, as there are no maturing securities held by the public.
Primary dealers trade government securities with the central bank and are obligated to participate in Treasury auctions.