Econoday Report: 20-Year TIPS Auction 24, 2007

2007 U.S. Economic Events & Analysis

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20-Year TIPS Auction

Definition
The Treasury sells inflation-indexed securities, also known as TIPS, at regularly scheduled auctions. Competitive bids at these single-price auctions determine the interest rate paid on each issue, which remains fixed. Twenty-three primary dealers (as of July 2006) are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold, resell, or trade the securities with other firms. The Treasury usually announces the amount, date and time of the 20-year TIPS auction in the third week of January. The reopening is usually announced in the third week of July. In both cases, 20-year TIPS are usually auctioned in the last week of the month. These TIPS are issued (settled) on the last business day of the month. These TIPS, however, have a mid-month maturity date. Consequently, investors who purchase these securities at auction are required to pay the interest accrued between the 15th of the month and the issue date. The 20-year issue in July 2004 had an initial maturity date of 20 1/2 years and was reopened in January and July 2005. Why Investors Care

Yield Awarded

2.600 %

Highlights
Demand was very strong for the Treasury's 20-year TIPS offering, a reopening of the January issue. Buyside accounts were big buyers, making up 62 percent of accepted competitive bids. High yield, at 2.600 percent, was several basis points below expectations. Treasuries firmed in reaction to the auction which will raise expectations for strong results in Wednesday's 2-year and Thursday's 5-year Treasury auctions.

Trends

2007 Release Schedule

Released On: 1/23 7/24

Released For: Dec Jun