20-year TIPS auction yield 2.494%

Tuesday, July 25th, 2006
Categorized as: TIPS

The high yield was 2.494% in the reopening of January’s 20-year TIPS, which the Treasury closed this morning. The actual interest rate that January’s 20-year TIPS pay is just 2% of the $1,000 face value, so, as always, the difference came out of the bond’s price, which was $942.78(150) for a $1,000 bond.

These bonds have interest payment days of January 15 and July 15, so investors also have to prepay interest of $0.88(705) per bond to cover the period from July 15 to the bond’s issue date, July 31. This prepayment will be reimbursed to investors in the January 15 interest payment.

Thus the total cost to TreasuryDirect investors will be $943.67 per bond.

TreasuryDirect investors purchased $7,904,000 of the TIPS – about one-tenth of one percent of the total amount invested. This includes both the online and legacy versions of TreasuryDirect.

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FDIC Insured Certificates of Deposit can pay 1 or 2% more than savings bonds when held for a similar length of time. See top CD Rates Below:

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