U.S. 10-Year TIPS Auction May Yield 0.577%, Survey Shows

The government’s sale of $13 billion of 10-year Treasury Inflation Protected Securities may draw a yield of 0.577 percent, according to the average forecast of seven of the Federal Reserve’s 22 primary dealers in a Bloomberg News survey.

The inflation-indexed notes, which mature in July 2024, yielded 0.570 percent in pre-auction trading. Bids are due by 1 p.m. New York time.

The securities yielded 0.249 percent on July 24 at the previous 10-year TIPS sale. The record-low auction yield for the maturity was negative 0.75 percent in September 2012.

The offering’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.49, versus an average of 2.56 at the previous 10 auctions.

Indirect bidders, a category of investors that includes foreign central banks, bought 53.1 percent of the securities at the July sale. That compared with an average of 53.7 percent at the past 10 offerings.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 10.3 percent of the securities at the July auction, versus a 9.2 percent average at the past 10 sales.

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 returned 4.2 percent this year after losing 9.4 percent in 2013. It was their second annual loss since being introduced in 1997 and their worst year ever, according to Bank of America Merrill Lynch’s U.S. Inflation-Linked Treasury Index. The first loss was a 1.1 percent decline in 2008.

The broader Treasury market has gained 3.1 percent in 2014, compared with a 3.4 percent loss in 2013, Merrill Lynch bond indexes show.

The Fed’s primary dealers trade directly with the central bank and are obligated to participate in Treasury sales.

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