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 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 10/23/2006 Yield Awarded 2.691 % Highlights High yield for the Treasury's 5-year TIPS auction was 2.691 percent, well below expectations. The bid-to-cover also showed strength at 2.89. Demand from non-dealers was solid at 42 percent of accepted bids but down from 51 percent at April's auction. The offering size was especially small at $7 billion, a factor that boosted results. TIPS are considered specialty issues with limited demand, a reflection of the nation's stable inflation outlook. Tomorrow the Treasury will auction its popular 2-year note. Trends Data Source: Haver Analytics Consensus Data Source: Market News International Legal Notices | © 1998-2006 Econoday, Inc. All Rights Reserved.