And BMO's Aaron Kohli noted that.......>

US TSYS/TIPS: And BMO's Aaron Kohli noted that crude oil has "been more or less

stable over $50 which is a positive sign and likely part of the reason buyers

are coming back to TIPS." He adds that the "smaller reopening size" at $12B 10Y

TIPS reopening today "means there's a marginally smaller risk of a tail. Stats

bear that out with reopenings averaging 0.3bp stops through 1pm levels and

refundings just shy of a 1 bp tail."

- But Kohli noted some disadvantages for the TIPS 10Y reopening. "Breakevens

have risen significantly since July but are off the local peaks," he said. "We

don't see compelling value in 10-year breakevens at these levels and they look

rich versus 30-year breaks. The 5s/10s/30s BE fly is a few bps off the richest

levels of the last year, but doesn't look cheap by any measure."

- He also noted that CPI ex-shelter "has been on a downtrend for several months

now, and the fact that the Fed looked through it entirely is a discouraging fact

for TIPS investors and doesn't offer an incentive to price a higher inflation

risk premium."