Treasury Delays 1st Auction of Indexed Notes

The U.S. Treasury on Monday postponed its first auction of inflation-indexed 10-year notes, which had tentatively been planned for early January.

Roger Anderson, deputy assistant Treasury secretary, said more time is needed to complete the final terms and conditions for the securities, and to allow investment firms to review the plans.

Anderson wouldn’t elaborate on how long the delay would be or whether the auction would be postponed into February.

The Treasury had planned to sell the first notes in early January, with a settlement date of Jan. 15. Then, the Treasury said it was considering a Jan. 22 issue date, at the request of the Bond Market Assn. The industry group sought the delay so the 37 primary dealers could put in place the systems they need to handle accounting and settlement for the new debt, so-called “back office” operations.

Analysts estimated the size of the auction at $5 billion to $10 billion. Anderson, however, declined to comment Monday on the size of the initial offering.

The notes will rise in value, with a three-month lag, tracking increases in the consumer price index calculated by the Labor Department.

The yield on the new 10-year notes is expected to start at about 3.5% to 3.75%. The current 10-year note, by contrast, offers a real yield of 3.3%--the difference between its 6.3% yield and the inflation rate.