2008 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 primary dealers (as of November 30, 2007) 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
2.219 %

Highlights
Demand was very soft for the Treasury's twice-a-year 20-year TIPS auction where the bid-to-cover ratio, despite a very small auction size of $6 billion, was only 1.58. The issue is a reopening of the January issue with a very thin coupon rate of 1.750 percent, no doubt a factor behind the soft results. The stop-out rate of 2.219 percent was at least several basis points above the 1:00 p.m. bid. Investors are not scrambling to inflation-protected Treasuries, offering an indication that long-term inflation expectations are still stable.

Trends
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2008 Release Schedule
Released On: 1/24 7/22
Released For: Dec Jul


 
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