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Information on Negative Rates and TIPS

Treasury TIPS auction rules allow for negative real yield bids and describe how the interest (coupon) rate on the original issue would be set if the auction stops at a negative real yield. TAAPS handles negative-yield bids for all TIPS auctions, both for original auctions and reopening auctions.

In April 2011, Treasury amended paragraph (b) of 31 CFR 356.20 to state that if a Treasury note or bond auction results in a yield lower than 0.125 percent, the interest rate will be set at 1/8 of one percent with the price adjusted accordingly (i.e., at a premium). This change applies to all subsequent marketable Treasury note and bond issues: Treasury fixed-principal (also referred to as nominal) notes and bonds as well as Treasury inflation-protected notes and bonds.

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Department of the Treasury
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