About one or two hours after the auction closes, the Treasury Department publishes an auction result announcement on their web site. They also keep an archive of the results from previous auctions. There are many numbers in the auction result. You should pay particular attention to four numbers and one date.
High Yield. This is the most important number from the auction. It is the yield you earn from investing in this bond. It also determines the price you pay for the bond. After all bids are in, the Treasury Department goes from the lowest yield upward, until they reach a point at which they are able to sell all the bonds they wanted to sell. This final yield is the High Yield. Every winner gets this same High Yield, including those institutions who bid at a lower yield.
Interest Rate. For a new issue, the Interest Rate is the High Yield rounded down to the nearest 1/8%. If the High Yield is 0% or below, the Interest Rate will stay at 0%. This number determines how much interest the bond will pay every six months. The semi-annual interest will be:
Inflation adjusted principal on the payment date * Interest Rate / 2
For a reopening, the Interest Rate was determined when the bond was sold in the previous auction. It is already known before this auction started. The High Yield from the second auction may be higher or lower than the Interest Rate. When the High Yield is higher than the Interest Rate, the bond is sold at a discount. When the High Yield is lower than the Interest Rate, the bond is sold at a premium.
Adjusted Price and Adjusted Accrued Interest per $1,000. These two numbers determine the amount of money you need to pay for each $1,000 bond. It is calculated by:
Adjusted Price * 10 + Adjusted Accrued Interest per $1,000
Do the calculation and multiply it by the number of bonds you ordered. Make sure you have that much money in your account by the Issue Date.
Issue Date. This is the date when you will officially own the bond. It is also the date when you have to pay for your purchase. It is usually a few days after the auction date. Make sure you have enough cash in your account on this date.
That’s it. On the issue date, you will become a proud owner of some TIPS you bought from an auction.