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-three primary dealers (as of July 2006) 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 10/12/2006 Yield Awarded 2.426 % Highlights Demand was strong for the Treasury's $8 billion auction of 10-year inflation protected notes, awarded at a high yield of 2.426 percent that was well under expectations. The bid-to-cover was also strong at 2.09. Demand from non-dealers was stronger than usual, making up a sizable 54 percent of accepted bids. There was no reaction to the results, however they do suggest that the risk of inflation, just yesterday described in FOMC minutes as still "substantial," may be firming demand for inflation protected securities. 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.