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 10-year TIPS auction four times a year: January, April, July and October. The 10-year TIPS are usually announced at the beginning of January and July. The April and October announcement calls for a reopening of the previously issued security. In each of the aforementioned months, 10-year TIPS are auctioned in the second week of the month. These TIPS are issued on the 15th of the month; if it falls on a weekend or holiday, then they are issued (settled) on the next business day. Released on 01/12/2006 Yield Awarded 2.025 % Highlights The U.S. Treasury auctioned $9 billion of 10-Year TIPS with a coupon rate of 2 percent and a high yield of 2.025 percent. Demand for this issue was slightly weaker than for the October auction when the bid-to-cover ratio was slightly higher. The spread between yields on TIPS and regular notes is considered by economists and market players to represent investors' views of inflation. With the 10-year note yield running near 4.45 percent, it means that long term inflation expectations are running at roughly 2 1/2 percent. (4.45 - 2.025). Trends The yield on the 10-year TIPS note hovers near yields of much shorter term notes, reflecting its guarantee against inflation risk. Data Source: Haver Analytics Consensus Data Source: Market News International Legal Notices | © 1998-2006 Econoday, Inc. All Rights Reserved.