The U.S. Treasury Department announced the results of an auction of 10-year inflation-protected bonds on Tuesday, with the securities receiving high demand from investors.
The stop-out rate for the auction was 2.245 percent and the bid-to-cover ratio, a measure of demand for the securities, was 2.48.
Treasury Inflation-Protected Securities, or TIPS, are a group of bonds that guarantee a certain return above inflation. The securities are adjusted based on the government's consumer price index, a closely-watched gauge of inflation.
Besides offering investors a way to control for inflation, TIPS, which were first offered in 1997, also provide policymakers valuable information about inflation expectations, by comparing how the TIPS trade as compared to standard treasury bonds.
The last auction of TIPS took place in late October, when the government sold $6 billion worth of 4-year, 6-month TIPS. Earlier that month, the Treasury Department auctioned $6 billion of 9-year, 9-month TIPS.
The last auction of 10-year TIPS took place in July, when the government sold $8 billion of the securities. That auction, which took place well before the financial crisis that has roiled markets over the past several months, drew a stop-out rate of 1.485 percent and a bid-to-cover ratio of 1.83.
A bid-to-cover ratio is a closely-watched statistic that measures the amount of bids for each dollar worth of securities the government sells. The higher the number, the higher the level of demand.
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