The U.S. sale of $9 billion in 30-year Treasury Inflation Protected Securities (TIPS) drew the weakest demand in a dozen years amid stagnant inflation and as the Federal Reserve reduces its bond purchases.
The bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 2.34, the lowest level since a sale in October 2001, the last offering before the U.S. suspended sales of the security for almost a decade. Auctions resumed in February 2010. The 30-year TIPS sold yesterday yielded 1.495 percent, the most since June 2011. The average forecast of seven of the Fed's 22 primary dealers in a Bloomberg News poll was a yield of 1.463 percent.
"The basis of strong buying of TIPS has to be stronger inflation before investors are enticed back into the market, and we just aren't seeing much," said Aaron Kohli, an interest-rate strategist in New York at BNP Paribas SA, which as a primary dealer is obligated to bid in U.S. debt sales. "The big takeaway from a weaker auction is that investors are willing to buy, but a greater concession is needed or real inflation pressures need to step up."
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
- Exclusive discounts on ALM and Treasury & Risk events.
- Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.
*May exclude premium content
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
