The 20 year TIPS auction was mixed as the yield was almost 2 bps above where it was trading just prior but the bid to cover at 2.27 was the highest since this product was introduced in July ’04. The average has been around 1.80. The level of indirect bidders totaled 47.8% vs the average seen since ’04 at 54.5% but the comparison is now apples to oranges as the Treasury has altered the methodology of calculating the number of indirect bidders. The backdrop of this auction was implied inflation expectations that have ticked up over the past few weeks to the highest level since mid June, with the rally in stocks and also the US$ index trending near the lowest level since Dec. As long as the Fed is running both ZIRP and QE policies, there will be good demand for inflation protection. The other key auction of the week will be Thursday’s 7 year as the others are shorter term in nature that should not present a problem in selling.