Traders remain mildly optimistic on....>

US TSYS/TIPS: Traders remain mildly optimistic on today's 1pm ET $14B 5Y TIPS

reopening auction, with US and foreign investment demand is expected tho

inflation is quiet right now; traders expected a 0.10% rate.

- New Century Advisors inflation strategist Com Crocker said auction will be

done "close to the market" or may even stop through.

- Credit Agricole's Alex Li: Auction shd be "large liquidity event," and 5Y TIPS

was "tight in the repo" market, indicating good shorts, and breakevens are at

"more attractive levels. But inflation is "benign", TIPS carry turns negative

"starting in September," he said. 

- SMRA's John Canavan: 5Y TIPS reopening raises "all new cash." 

- BMO analysts Ian Lyngen and Aaron Kohli expect "decent" demand. "The auction

serves a valuable function in aggregating liquidity and we'd expect the 5-year

TIPS auction to do that to an even greater extent." 

- HISTORY: April $16B 5Y TIPS auction (new) proved strong: 2.52 bid/cover, a

-0.049% high yield, and a stellar 74.2% indirect award, 9.2% directs leaving

only 16.7% for primary dealers to mop up.