Now raising intellectual capital
Treasury announced that it’s tweaking its TIPs program so investors can get inflation protection for 30 years rather than 20 years. It will certainly make break-even calculations much easier since the government doesn’t sell regular run-of-the-mill Treasurys with 20-year maturities.
The first batch of 30-year TIPS will be sold in February, while the 20-year variety will be discontinued immediately.
I’m just getting a chance to look at the Treasury’s quarterly refunding announcement now, and no surprise here. It’s a record amount at $75 billion that will start to hit the market next week. All the details are here. Its decision to increase TIPs issuance also comes as no surprise after the Wall Street Journal flagged it here.
Given the gains in the Treasury market today on weaker-than-expected data on the service sector, it doesn’t look like the mountain of the supply, with much more to come, is weighing too heavily on the Treasury market. But like many things in the financial markets, it won’t matter until suddenly it does. Improving economic conditions will allow bond investors to narrow their focus back on the supply, but given today’s data, which also included a 371K decline in private sector jobs, and the looming monthly employment report from the BLS on Friday, fears about the economy still rule.