U.S. to sell TIPS at a negative yield, but with positive coupon
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices gained a little ground Thursday, pushing longer-term yields down, before what is expected to be the first auction of inflation-indexed notes in which the Treasury has to set a minimum positive coupon even though the debt is trading with negative yields.
The U.S. will sell $14 billion in 5-year Treasury Inflation Protected Securities.
Yields on 10-year notes UST10Y -0.82% , which move inversely to prices, fell 3 basis points to 3.38%. A basis point is 1/100 of a percent.
Thirty-year bond yields UST30Y -0.54% declined 3 basis points to 4.44%.
Yields on 2-year notes UST2YR -1.35% slipped 2 basis points to 0.66%.
Bond market trading is expected to end early, around 2 p.m. eastern time, and remain closed Friday for Good Friday.
“The market is midrange and the process of consolidation is ongoing with the 10-year squarely between resistance of 3.25% and support of 3.56%,” said strategists at CRT Capital Group. Read about Treasury market action Wednesday.
Also, the Treasury Department said it will sell $99 billion in debt next week, starting with $35 billion in 2-year notes on Tuesday. That will be followed by a sale of $35 billion in 5-year notes UST5YR -0.90% the next day and $29 billion in 7-year notes UST7YR -1.04% on Thursday.
The amounts are the same as last month’s sales and matched analysts’ expectations.
Bonds gained slightly after data U.S. initial jobless claims fell by 13,000 in the latest week to 403,000, declining less than economists expected. See story on jobless claims.
Also, a report showed manufacturing in the Philadelphia area slumped more than forecast this month. A separate report said home prices fell in February. Read more on Philly Fed.
Negative yield on TIPS auction
At 11:30 a.m. Eastern time, the Treasury will close its auction of 5-year Treasury Inflation Protected Securities. That’s earlier than its usual auction time because the market is expected to close early and remain closed the next day for Good Friday.
The to-be-issued TIPS were trading as low as -0.22% in morning action, according to Stan Sun, an analyst at Nomura Securities.
At $14 billion, it’s also the largest sale of TIPS of any maturity. See recent Treasury auction results.
