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-two primary dealers (as of August 2004) are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold, resell, or trade the securities with other firms. The Treasury announces the amount, date and time of the 5-year TIPS auction twice a year - in April and October. The 5-year TIPS are usually announced during the third week of April and auctioned the subsequent week. In October, TIPS are also announced during the third week of the month, but this is typically a reopening of a previously issued security. For instance, the October 2004 issue had an initial maturity of 5 1/2 years; it was reopened in April 2005 and will be reopened again in October 2005. The 5-year TIPS are issued on the last business day of the month. These securities mature at mid-month; 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. Released on 04/25/2006 Yield Awarded 2.379 % Highlights The U.S. Treasury auctioned $11 billion of 5-year TIPS today with a coupon rate of 2.375 and a high yield of 2.379 percent. Both the coupon rate and the yield are quite a bit higher than last October, when the Treasury last auctioned this security. The bid-to-cover ratio stood at 1.46, somewhat lower than the last three auctions. Demand for this issue may not have been as strong as expected. Bond investors were expecting the high yield to settle somewhere between 2.34 and 2.35 percent. It is surprising that demand wasn't stronger in this environment with rapidly rising commodity and precious metal prices. Trends Data Source: Haver Analytics Consensus Data Source: Market News International Legal Notices | © 1998-2006 Econoday, Inc. All Rights Reserved.