10-year TIPS auction yield is 1.25%

The high yield was 1.25% in the Treasury's 10-year TIPS auction held yesterday. This was a reopening of the January issue of 10-year TIPS, so the actual term of these bonds is nine years and nine months.

The actual interest rate that will be paid by the investment is 1.625% (1-5/8%). The price for a $1,000 bond was set at $1,043.53623.

The bonds will have interest payment days of January 15 and July 15, so investors also have to prepay interest of $4.09874 per bond to cover the interest between January 15 and the bond's issue date, April 16. This prepayment will be reimbursed to investors in the July interest payment.

Thus the total cost to TreasuryDirect investors will be $1,047.63497 per bond.

Both the price and yield have been adjusted, using an index ratio of 3.878347342, for inflation during the Jan 15-Apr 16 period.

TreasuryDirect investors purchased $14,328,300 of the TIPS - less than one-fourth of one percent of the total amount invested. This includes both the online and legacy versions of TreasuryDirect.