US Treasury 10-Year TIPS Yield Hits 2.438%, Highest Since 2008

The US Treasury on July 23 (local time) auctioned $21 billion in new 10-year Treasury Inflation-Protected Securities (TIPS), with the yield settling at 2.438%—the highest level since October 2008. The yield came in 2.8 basis points above the when-issued trading level, reflecting weaker-than-expected demand as the bid-to-cover ratio fell to 2.30 times from May's 2.52 times. The 2.438% yield marks a 26.9-basis-point increase from the prior May auction's 2.169%, according to data published on the US Treasury Department's website.

Auction Metrics Show Decline in Bidder Participation

The bid-to-cover ratio of 2.30 times fell below the three-auction average of 2.46 times, signaling reduced investor appetite. Indirect bidders, typically representing foreign demand, accounted for 65.2% of the auction—up 3.8 percentage points from the previous auction. Direct bidders took 25.0%, down 2.5 percentage points, while primary dealers absorbed 9.9% of the issuance, a decline of 1.2 percentage points.

US Treasury 10-Year TIPS auction results. Source: US Treasury Department website.

The 2.438% yield represents the highest level for a 10-year TIPS auction since October 2008, when the yield reached 2.850%. The May auction had settled at 2.169%.

Secondary Market Yields Rise Following Auction Results

In the secondary market for US Treasuries, the nominal 10-year Treasury yield increased shortly after the TIPS auction results were released, around 1:00 PM New York time on July 23. The yield movement reflected market participants adjusting positions in response to the higher-than-expected TIPS auction outcome.

US Treasury 10-year yield movement before and after auction. Source: Yonhap Infomax.

The when-issued trading level prior to the auction had indicated a yield approximately 2.8 basis points lower than the final 2.438% settlement, suggesting dealers underestimated the yield required to clear the $21 billion offering.

FAQ

What yield did the US Treasury 10-year TIPS auction settle at on July 23? The US Treasury 10-year TIPS auction on July 23 (local time) settled at a yield of 2.438%, the highest level since October 2008 when the yield reached 2.850%. This represents a 26.9-basis-point increase from the prior May auction's 2.169%.

Why did the 10-year TIPS auction show weaker demand? The bid-to-cover ratio fell to 2.30 times from May's 2.52 times and came in below the three-auction average of 2.46 times. The final yield of 2.438% was 2.8 basis points above the when-issued trading level, indicating investors required a higher yield to participate in the $21 billion offering.