How do you know when the Treasury Department will hold an auction and for what issues the auction will be? Right now the Treasury Department sells TIPS by auction only once a month. Their schedule looks like this:
| ||5-Year ||10-Year ||30-Year |
|January || ||N || |
|February || || ||N |
|March || ||R || |
|April ||N || || |
|May || ||R || |
|June || || || R|
|July || ||N || |
|August ||R || || |
|September || ||R || |
|October || || || R |
|November || ||R || |
|December ||R|| || |
N = a new issue that hasn't been on the market before
R = a reopening of a bond sold in a previous auction
A reopening means selling additional quantities of an existing bond at a different yield. For example, this schedule table shows that in the month of April, there is an auction for a 10-year bond in the first half of the month. It is a reopening of the same bond first sold in January. It's really a 9-year 9-month bond to be precise.Then in the second half of the month, there is an auction for a new issue 5-year bond.
For the exact auction dates, the Treasury Department publishes a tentative auction schedule a few months in advance. Although it is said to be tentative, the schedule is pretty much set once it's published. The schedule includes auctions for Treasury bills, regular ("nominal") Treasury notes and bonds, and TIPS. The TIPS auctions are shaded in blue so they are easy to spot.
Here's a snapshot of what the schedule looked like in July 2008:
There are three dates in the schedule.
1. Announcement Date. The Announcement Date is when the Treasury Department publishes an official announcement. The announcement will contain more details about the bond being auctioned. You can't place an order until the Announcement Date.
From the screenshot above, we can see there will be two TIPS auctions in July 2008. The Announcement Dates are Monday July 7, 2008 for a 10-year TIPS issue and Thursday July 17, 2008 for a 20-year TIPS issue.
2. Auction Date. The Auction Date is the date when the Treasury Department actually holds the auction. The cutoff time is specified in the announcement, usually around 12:00 p.m. Eastern Time. Your order must be received on or before the auction cutoff time on the Auction Date. If you place order through a brokerage account, the brokerage firm may impose its own cutoff time before the official cutoff time to allow itself some time for transmitting your order to the Treasury. For example the current cutoff time at Vanguard Brokerage Service is 9:30 a.m. Eastern Time for online orders or 10:00 a.m. Eastern Time for phone orders. To play it safe, it's better to place the order at least one business day before the Auction Date.
For the two auctions in our example, the actual Auction Dates are Thursday July 10, 2008 for a 10-year TIPS issue and Tuesday July 22, 2008 for a 20-year TIPS issue.
3. Settlement Date. The Settlement Date is the date when you actually pay and receive the bonds. You must have enough cash ready on this date.
For the two auctions in our example, the Settlement Dates are Tuesday July 15, 2008 for a 10-year TIPS issue and Thursday July 31, 2008 for a 20-year TIPS issue.
The next step is reading the official announcement.