August 22, 2019 / 5:32 PM / 6 months ago

Primary dealers get record low share of U.S. 30-year TIPS supply

NEW YORK (Reuters) - The U.S. Treasury Department on Thursday awarded primary dealers their smallest ever share of 30-year Treasury Inflation Protected Securities at an auction as investors took the majority of the supply, Treasury data showed.

Primary dealers, or the top 24 Wall Street firms that do business directly with the Federal Reserve, received 10.63% of the $7 billion in 30-year TIPS offered 912810SG4=, resulting in their yield to be sold at 0.501%, which was the lowest yield at an auction of this maturity since October 2012.

“Dealers ended up with very little, but the lack of any follow-through buying suggests that their small takedown was by design,” Tom Simons, senior money market strategist at Jefferies LLC, wrote in a research note.

Traders and investors turned their focus on Federal Reserve Chairman Jerome Powell’s speech at 10 a.m. (1400 GMT) on Friday at an economic conference in Jackson Hole, Wyoming.

They await whether Powell may signal the U.S. central bank is prepared for a series of rate cuts to counter the threat from a softening global economy and trade tensions between China and the United States.

Indirect bidders, which include fund managers and foreign central banks, were allotted 81.62% of the 30-year TIPS supply, marking their second-largest share ever at such an auction.

Direct bidders which include smaller bond dealers and certain large investors acquired 7.75% of the supply, which was their biggest share since June 2017.

The ratio of bids to the amount of 30-year TIPS offered came in at 2.70, the strongest reading on overall demand since June 2017.

On the open market, the yields among TIPS and regular Treasuries scaled back from their earlier highs after the latest 30-year TIPS sale.

Reporting by Richard Leong; Editing by Nick Zieminski and Lisa Shumaker

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