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Put Condor Update


GBP1.147bln of short-dated gilts with offer-to-cover of 2.93x

BMO analyst Aaron Kohli said on........>

US TSYS/TIPS: BMO analyst Aaron Kohli said on today's 1pm ET $11B 10Y TIPS
reopening that it's not "a strong value proposition given the runup in
breakevens. Flows into the sector have been strong with about $2.2 bn into the
funds we track in August, which should provide some lift for the demand at
auction, but we'd be reluctant to endorse the value of the note."
- He adds that US "Inflation also does appear to be bouncing somewhat and oil
has stabilized above $50, but the move in breakevens mostly bakes this in. After
the FOMC statement and dot plot yesterday, we see little reason to buy inflation
protection as long as the Fed's game of chicken with CPI continues."
- He adds TIPS flows are "biggest positive" for 10Y TIPS auction "at $2.2 bn
into the TIPS funds we track in August" but "flows were positive in July as well
but did not help the auction which sported a 5.9 bp tail. Since then, breakevens
have performed strongly with a 10bp gain since then, so this does suggest that
the flows are not to be faded yet." He said 5y/5y breakevens are still on "lower
range of where they've been in the last several years, though that's not a huge
selling pt given where CPI has been in the past 6 months."