Demand for inflation protection evident in the 5 yr TIPS auciton

The demand for inflation protection was evident in the Treasury 5 year TIPS auction as while the yield was about in line with expectations, the bid to cover of 3.10 is the highest since they were reintroduced in 2004 and is well above the average seen since ’04 of 2.12. The implied inflation rate in the 5 year TIPS today is rising a large 13 bps to 1.71%, the highest since June.

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