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J.P.Morgan note that Thursday will see the Treasury "auction $16bn new 10-Year TIPS, $1bn larger than the last new-issue auction. Since the May auction, 10-Year real yields have declined by about 34bp, after adjusting for carry over the period, and are trading near all-time lows. Meanwhile, breakevens have narrowed by 5bp and remain near the middle of the range they have held over the last couple of months. After adjusting for fundamental drivers including the level of nominal yields and energy prices, intermediate breakevens currently appear fairly valued. However, real yields have diverged significantly from fundamentals, and currently appear roughly 50bp too low. From a technical perspective, retail demand has remained robust, with TIPS-focused funds continuing to record positive inflows, and carry on long TIPS and breakeven positions remains highly positive through October, given the strength of the June CPI print. The WI roll opened around +3.8bp, somewhat rich to our fair value estimate, and is now trading at +3.0bp, underperforming versus the erosion of carry. Overall, even though real yields have backed up about 6bp from their lows reached on Monday, we think tomorrow's supply will require some concession from currently rich yield levels to underwrite smoothly."