10 Year Tips auction

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Grt2bOutdoors
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10 Year Tips auction

Post by Grt2bOutdoors » Wed Jul 18, 2018 4:50 pm

Anyone buying 10 year TIPs in tomorrow’s Treasury auction?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Angst
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Re: 10 Year Tips auction

Post by Angst » Wed Jul 18, 2018 5:35 pm

I'm in. I was for the January issue as well.

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Blueskies123
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Re: 10 Year Tips auction

Post by Blueskies123 » Wed Jul 18, 2018 5:44 pm

The 5 year is just a few basis points less in yield?

Angst
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Re: 10 Year Tips auction

Post by Angst » Wed Jul 18, 2018 5:53 pm

Blueskies123 wrote:
Wed Jul 18, 2018 5:44 pm
The 5 year is just a few basis points less in yield?
https://www.treasury.gov/resource-cente ... &year=2018

As you can see, the yield curve is fairly flat right now. Only 10 BP between the 10yr and the 30yr. I think I know which one Doc would recommend, that is, between the 10 and the 30. Between the 5 and the 10? I dunno.

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#Cruncher
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Re: 10 Year Tips auction

Post by #Cruncher » Thu Jul 19, 2018 4:11 pm

The yield came in at 0.762% (see auction results PDF file), slightly above what I was guessing last night based on the year-to-year yield trend of July TIPS maturing 2019 - 2027 (see WSJ TIPS Quotes 7/18/2018):

Code: Select all

                                vs Prior
  Matures     Coupon    Yield       Year
----------    ------    ------  --------
07/15/2019    1.875%    0.574%
07/15/2020    1.250%    0.609%    0.035% 
07/15/2021    0.625%    0.620%    0.011% 
07/15/2022    0.125%    0.609%   (0.011%)
07/15/2023    0.375%    0.619%    0.010% 
07/15/2024    0.125%    0.654%    0.035% 
07/15/2025    0.375%    0.680%    0.026% 
07/15/2026    0.125%    0.706%    0.026% 
07/15/2027    0.375%    0.729%    0.023%
The following graph shows how, over the last year, the yield spread has narrowed among 5, 10 year, & 30 year TIPS:

Image

grok87
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Re: 10 Year Tips auction

Post by grok87 » Thu Jul 19, 2018 4:37 pm

Demand was weak. So congrats to those who bought at today’s auction. You got a good deal compared to the secondary market.

“Treasury's $13 B 10-year TIPS auction was poorly subscribed Treasury's $13 B 10-year TIPS auction was poorly subscribed and weaker than expected. The offering stopped at 0.762%, tailing out versus the 0.747% at the bid deadline. And it compares to the 0.548% for the $13 B January new issue and 0.934% for the $11 B May reopening. Bids totaled $28.9 B for a 2.22 cover versus January's 2.69, May's 2.42, and a 2.40 6-auction average. Indirect bidders took 62.1% compared to 78.9% in January and 64.3% in May, and the 66.1% average. About the only good statistic was direct bidding which more than doubled to 15.3% versus May's 6.7% and a 8.1% average.”

Read more at:
https://thefly.com/landingPageNews.php?id=2760892
Keep calm and Boglehead on. KCBO.

drenaud
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Re: 10 Year Tips auction

Post by drenaud » Thu Jul 19, 2018 4:51 pm

Do you think the coupon with be .75%?

grok87
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Re: 10 Year Tips auction

Post by grok87 » Fri Jul 20, 2018 6:58 am

drenaud wrote:
Thu Jul 19, 2018 4:51 pm
Do you think the coupon with be .75%?
Yes coupon is 0.75%. As it was a reopening auction this was known in advance.
Keep calm and Boglehead on. KCBO.

drenaud
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Re: 10 Year Tips auction

Post by drenaud » Fri Jul 20, 2018 7:08 am

grok87 wrote:
Fri Jul 20, 2018 6:58 am
drenaud wrote:
Thu Jul 19, 2018 4:51 pm
Do you think the coupon with be .75%?
Yes coupon is 0.75%. As it was a reopening auction this was known in advance.

I found this on the treasury direct website. I thought it was a new issue.

The 10-year TIPS is auctioned as an original issue in January and July. The 10-year TIPS is auctioned as a reopening in March, May, September, and November.

Angst
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Re: 10 Year Tips auction

Post by Angst » Fri Jul 20, 2018 7:12 am

grok87 wrote:
Fri Jul 20, 2018 6:58 am
drenaud wrote:
Thu Jul 19, 2018 4:51 pm
Do you think the coupon with be .75%?
Yes coupon is 0.75%. As it was a reopening auction this was known in advance.
No grok, this was a new auction. 10 yr TIPS currently auction as new issues in Jan and July and have auction reopenings on the subsequent odd-numbered months. The 0.75% (3/4%) interest rate was known to me when the auction results were released yesterday here: https://www.treasurydirect.gov/instit/a ... 0719_1.pdf Based on the yield curve it was going to be either 0.625% or 0.75%

drenaud - Coupons are set in 1/8% increments, i.e. 0.125% increments and are determined by original auction results.

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#Cruncher
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Re: 10 Year Tips auction

Post by #Cruncher » Fri Jul 20, 2018 1:21 pm

Angst wrote:
Fri Jul 20, 2018 7:12 am
10 yr TIPS currently auction as new issues in Jan and July and have auction reopenings on the subsequent odd-numbered months.
Here is the complete annual schedule of 5, 10, and 30 year TIPS that has been followed since 2011:

Code: Select all

          | Jan 10 | Feb 30 | Apr 5  | Jul 10 |
January   | Initial|        |        |        |
February  |        | Initial|        |        |
March     | Reopen |        |        |        |
April     |        |        | Initial|        |
May       | Reopen |        |        |        |
June      |        | Reopen |        |        |
July      |        |        |        | Initial|
August    |        |        | Reopen |        |
September |        |        |        | Reopen |
October   |        | Reopen |        |        |
November  |        |        |        | Reopen |
December  |        |        | Reopen |        |
Angst in same post wrote:Coupons are set in 1/8% increments, i.e. 0.125% increments and are determined by original auction results.
To elaborate, at an initial auction the coupon is set at the highest 1/8% increment equal to or below the auction yield. The Treasury could sell all $13 billion of this issue without needing to accept bids higher than 0.762%. [1] Therefore the coupon was set at 0.75%. If the high bid had been 0.749%, the coupon would have been 0.625%. This rule causes the price [2] at an initial note or bond auction to be at par or at a slight discount to par (i.e., <= 100).

There is an exception to this rule: every Treasury note or bond including TIPS will have a coupon of at least 1/8%. Therefore if the yield at an initial auction is less than 0.125%, the coupon will still be set at 1/8%, and the price will be at a premium to par (i.e., > 100).

Code: Select all

---- Yield -----
 From       To      Coupon
------    ------    ------
less than 0.125%    0.125%  (premium price)
0.125%    0.249%    0.125%  (par or discount price)
0.250%    0.374%    0.250%   ...
0.375%    0.499%    0.375%
0.500%    0.624%    0.500%
0.625%    0.749%    0.625%
0.750%    0.874%    0.750%
0.875%    0.999%    0.875%
1.000%    1.124%    1.000%
…
  1. All non-competitive bids (we small guys) and all successful competitive bids (those of 0.762% or less) receive the same 0.762% yield. All competitive bids of 0.763% or more are not filled.
  2. By "price" I mean the "Unadjusted price", not the "Adjusted price" which includes the inflation factor. On this auction results PDF file the former is 99.885038 , while the latter is 100.098792.

grok87
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Re: 10 Year Tips auction

Post by grok87 » Fri Jul 20, 2018 1:27 pm

Angst wrote:
Fri Jul 20, 2018 7:12 am
grok87 wrote:
Fri Jul 20, 2018 6:58 am
drenaud wrote:
Thu Jul 19, 2018 4:51 pm
Do you think the coupon with be .75%?
Yes coupon is 0.75%. As it was a reopening auction this was known in advance.
No grok, this was a new auction. 10 yr TIPS currently auction as new issues in Jan and July and have auction reopenings on the subsequent odd-numbered months. The 0.75% (3/4%) interest rate was known to me when the auction results were released yesterday here: https://www.treasurydirect.gov/instit/a ... 0719_1.pdf Based on the yield curve it was going to be either 0.625% or 0.75%

drenaud - Coupons are set in 1/8% increments, i.e. 0.125% increments and are determined by original auction results.
My mistake,Thanks for the correction.
Keep calm and Boglehead on. KCBO.

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