The 10 year TIPS reopening auction was solid and bidding was aggressive. The yield was about 5 bps below expectations and the bid to cover of 3.12 was the highest since Jan 1999 and well above the average over the past two years of 2.17. Indirect bidders totaled 44%, slightly below the July auction of 49.7%. Bottom line, combining this with another breakout attempt in the price of gold and the US$ trading near recent lows and its clear that investors want inflation protection and are less sanguine with the inflation picture than the Fed is. The conventional 10 year note did trade lower in response as a yield of 3.20% doesn’t reflect much fear of inflation.
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