Canary in the coal mine? TIPS dip to record low yield

The U.S. sold $13 billion in 10-year Treasury Inflation Protected Securities at a record low negative yield with investors willing to pay a premium to guard against the threat of rising consumer prices. The TIPS were auctioned at a so-called high yield of negative 0.089 percent, the Treasury said today. The U.S. first sold the 10-year securities at a negative yield in January. Five-year TIPS have also been sold at negative yields. “We are continuing to see inflation expectations gather steam,” said Aaron Kohli, an interest-rate strategist at BNP Paribas SA in New York, one of 21 primary dealers that are required to bid at the sale. “With energy prices running hot the market has priced in inflation over the next 10 years.” The bid-to-cover ratio for the notes, which gauges demand by comparing the amount bid with the amount offered, was 2.81, compared to an average of 2.74 at the past 10 auction of the securities. Indirect bidders, a category of investors that includes foreign central banks, bought 40.4 percent of the securities, compared to an average of 41.6 percent at the past 10 auctions. --Bloomberg News--