Analysts at BMO expect a "decent.......>

US TSYS/TIPS: Analysts at BMO expect a "decent reception" at Thursday's 1pm ET

$14B 5Y TIPS reopening auction, but "struggle with gauging the influence of TIPS

supply on the nominal" Tsys. They said "breakeven curve has steepened in recent

weeks to make room for the new issue, and our experience suggests that the setup

for TIPS is more or less complete," they said. "As with nominals, the auction

serves a valuable function in aggregating liquidity and we'd expect the 5-year

TIPS auction to do that to an even greater extent." 

- But they are "less confident that a good reception on Thursday will lead to a

sustainable bounce in breakevens, but with five of the last six auctions coming

through 1 pm levels (and the sixth only tailing 0.1 bp), we're expecting a

decent result at this 5-year reopening as well. Real yields are at the upper end

of recent auctions likely adding to the real money bid and inflows are solid for

the product. Breakevens are also lower than they were at the last 2 auctions,

both of which were well received. Finally, energy momentum appears positive as

well with news of a potential hurricane in the Gulf of Mexico among the factors

helping energy markets rise."