10-year TIPS auction yield is 2.360%
Thursday, October 11th, 2007
Categorized as: TIPS
The high yield was 2.360% in the Treasury’s 10-year TIPS auction held today. This was a reopening of the July issue of 10-year TIPS, so the actual term of these bonds is nine years and nine months.
The actual interest rate that will be paid by these TIPS is 2.625% (2-5/8%). To compensate for the difference between today’s bids and the bond’s coupon rate, the price for a $1,000 bond was set at $1,027.21944.
The bonds will have interest payment days of January 15 and July 15, so investors also have to prepay interest of $6.59006 per bond to cover the interest between July 15 and the bond’s issue date, October 15. This prepayment will be reimbursed to investors in the January interest payment.
Thus the total cost to TreasuryDirect investors will be $1,033.8095 per bond.
Both the price and yield have been adjusted, using an index ratio of 1.00420, for inflation during the Jul 15-Oct 15 period.
TreasuryDirect investors purchased $12,900,000 of the TIPS – about 2 tenths of one percent of the total amount invested. This includes both the online and legacy versions of TreasuryDirect.