Treasury Action: TIPS are weaker ahead of today's $13 B 10-year auction
Treasury Action: TIPS are weaker ahead of today's $13 B 10-year auction, and more importantly as commodity prices extend declines. The when issued is trading with a bid/offer spread of 0.766%/0.734%. The drop in oil and other commodities could limit demand. However, players could be more interested in picking up the issue if a 0.75% coupon can be achieved. Such a rate hasn't been seen since May 2011. The January benchmark has richened slightly and trades at 0.775%; it was awarded at 0.548% (hence a 0.5% coupon). The May reopening stopped at 0.934%. The yield was as cheap as 0.937% on May 17. The 10-year breakeven is at 208 bps and change, and is down from 215 bps in early June, and a 2018 high of 2.199% from mid-May. CPI and other inflation indicators have picked up, a fact acknowledged by the Fed, though forecasts aren't necessarily pointing to further acceleration. The $11 B May reopening garnered a 2.42 cover and a 64.3% indirect bid. The January new issue was solid and had a 2.69 cover and 78.9% indirect.