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."