U.S. Sale of 30-Year TIPS May Yield 1.105%, Dealer Survey Shows

The U.S. auction of $7 billion of 30-year Treasury Inflation-Protected Securities may draw a yield of 1.105 percent, according to the average forecast of four of the Federal Reserve’s 22 primary dealers in a Bloomberg News survey.

The sale is the 18th long-bond TIPS offering since auctions of the security resumed in February 2010 after the Treasury stopped selling them in 2001. The bonds mature in February 2046. Bids are due by 1 p.m. New York time.

The securities yielded 1.200 percent at the last sale, a $7 billion offering on Oct. 22. They drew a record-low auction yield of 0.479 percent in October 2012.

The last sale’s bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.62, versus an average of 2.54 at the past 10 auctions.

Indirect bidders, investors that place their bids through primary dealers, bought 69.8 percent of the bonds at the October sale, compared with an average of 60 percent at the past 10 offerings.

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 8.5 percent of the securities at the last auction, compared with a 8.1 percent average at the past 10.

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 gained 2 percent this year after losing 8.1 percent in 2015, according to Bank of America Merrill Lynch’s 15+ Year U.S. Inflation-Linked Treasury Index.

Nominal Treasuries maturing in 15 years or longer have returned 7.1 percent, compared with a 1.3 percent loss in 2015, according to the Merrill Lynch 15+ Year 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.

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