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Author: Pappys Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: 10yr TIPS auction Date: 7/4/2006 8:57 PM
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I am interested in the upcoming auction of 10 year TIPS.

Is there anyway without a crystal ball to estimate what these will go for? I suppose what I am saying is if the rates are comparable to the last 5 year TIP rates I am interested but lower I am not.

So since I don't have a clue I am asking for advice.

Thanks
Pappy
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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17390 of 35367
Subject: Re: 10yr TIPS auction Date: 7/4/2006 10:28 PM
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This is the Bloomberg link most of us use as a first take on current yields.

http://www.bloomberg.com/markets/rates/index.html

Because the last 10-year TIPS, with 2% coupon, are now 6 months old (with accumulated inflation adjustment), the yield won't be precise for new TIPS, but unless things change in the next few days, new 10-year TIPS should be a 2.5% coupon, perhaps 2.375%, with a yield around 2.5% plus. Of course, drama can happen over a few days.

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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17391 of 35367
Subject: Re: 10yr TIPS auction Date: 7/4/2006 11:41 PM
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I am interested in the upcoming auction of 10 year TIPS.

The upcoming auction of 10 year TIPS will be on Thursday July 13'th. The best way to approximate what the yield will be (and the coupon in increments of 1/8 will be higher or lower with a discount/premium applied as necessary) is to see what similar notes are trading for on that day. You can only find similar ones since the only ones trading are already a few months older than these new 10-year notes.

Recent note auctions are summarized here -

http://wwws.publicdebt.treas.gov/AI/OFNtebnd

And you can see, the last 5-year TIPS auction results were -

*5-YEAR NOTE 04-28-2006 04-15-2011 2.375 2.379 100.067434 912828FB1

So, the coupon was 2.375% and the yield was 2.379%, and therefore there was a slight premium of 0.067434 paid for these notes. It looks like there should have been a discount rather than a premium in this case, ans I don't know why there was a premium rather than a discount. Maybe the numbers are wrong somehow???

But the last 9-year, 9-month TIPS auction results were -

*9-YEAR 9-MONTH NOTE 04-17-2006 01-15-2016 2.000 2.409 96.480271 912828ET3

So, in this case, the coupon was 2.000% and the yield was 2.409%, and therefore there was a large discount of 3.519729 for these notes. You might ask why the large discount, and the reason is because these aren't really new notes, but rather a "reopening" of 3 month older 10-year notes. But during those 3 months, the market rates for TIPS went up by quite a bit. The original 10-year TIPS auction results were much closer to the 2.000% coupon rate -

*10-YEAR NOTE 01-17-2006 01-15-2016 2.000 2.025 99.722833 912828ET3

with a slight discount of .277167 for a yield of 2.025%.

As far as the auction of 10-year TIPS notes on July 13'th, it is likely that those TIPS will have a coupon of 2.500% (a few days ago, I might have said 2.625%, but they have traded lower since then) and will yield somewhere in that vicinity. But of course, the bond market sometimes has large swings and those rates can change at anytime. Always remember that these notes and bonds are truly auctioned - that roughly means that the rates are determined by the bidders and by how much those bidders are willing to pay on the day of the auction.

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17392 of 35367
Subject: Re: 10yr TIPS auction Date: 7/5/2006 9:56 AM
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Rates are up quite a bit this morning, so maybe there was just a brief, day-trader, decline after the Fed said they might not keep raising. I suppose, at some point, I need to decide whether to go with my whole allocation now, or save some for October.

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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17393 of 35367
Subject: Re: 10yr TIPS auction Date: 7/5/2006 10:28 AM
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Rates are up quite a bit this morning, so maybe there was just a brief, day-trader, decline after the Fed said they might not keep raising. I suppose, at some point, I need to decide whether to go with my whole allocation now, or save some for October.

I think the rates may have dipped overnight and rose this morning since the 5-year TIPS are pretty close to there they were on the weekend (now 2.56% versus 2.55%). But the fixed rate 6-month through 30-year issues are up substantially this morning (rates are down).


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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17394 of 35367
Subject: Re: 10yr TIPS auction Date: 7/5/2006 11:44 AM
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<<Rates are up quite a bit this morning, so maybe there was just a brief, day-trader, decline after the Fed said they might not keep raising. I suppose, at some point, I need to decide whether to go with my whole allocation now, or save some for October.>>

I think the rates may have dipped overnight and rose this morning since the 5-year TIPS are pretty close to there they were on the weekend (now 2.56% versus 2.55%). But the fixed rate 6-month through 30-year issues are up substantially this morning (rates are down).


I seem to have made a mistake. The ones I looked at over the weekend were 10-year, not 5-year. And they are all trading much lower today, the 20-year's and 30-year's are each down over a point and their yields are much higher. All the TIPS yields are up between 8 and 9 basis points right now!

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