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Traders are cautious on the 1pm ET.....>

US TSYS/TIPS
US TSYS/TIPS: Traders are cautious on the 1pm ET US$12B 10Y TIPS reopening, but
it has cheapened up a bit this morning then some dip buying came in.
- SMRA's John Canavan: reopening "raises all new cash;" WI 10Y TIPS had "roll of
a little more than a bp" tho "always difficult to get a good handle on TIPS WIs.
The 10-yr breakeven rate climbed from 1.752% on Aug. 29 to 1.878% 2 days ago"
but "has fallen back" since FOMC "to 1.848% currently as the increased
likelihood of Fed rate hikes leaves" traders "less concerned about inflation"
wh/ may "work against" demand; "likely to be little mo-end need"  based on
latest mo-end extension figures. 
- BMO's Aaron Kohli: Auction "not strong value proposition" amid breakevens
runup; but sector flows strong: "about $2.2B in (TIPS) funds we track in Aug,
which shd provide some lift" for auction. He added inflation "bouncing somewhat
and oil has stabilized above $50" but breakeven move "mostly bakes this in." 
- HISTORY: July original $13B 10Y TIPS auction: 0.375% coupon, weak 1.98
bid/cover, 0.489% high yield; also 52.5% indirects, 8.05% directs and 39.5%
dealers.

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