The US Treasury Department will auction a $19 billion 10-year inflation-protected bond at 1 p.m. New York time on Wednesday. The bond yield is expected to hit the highest level since the 2008 financial crisis. Currently, the yield of 10-year TIPS is about 2.63%, and once hit 2.69% in the Wednesday session, the highest since November 2008; the yield of winning the bid in July reached 2.438%, which has already set a record of nearly 18 years at the time. The transaction price of this auction is expected to be about 0.5 basis points higher than the July issue price. Since the recovery in oil prices in mid-year, TIPS has performed relatively better than traditional nominal treasury bonds, but its performance lagged behind for a while after the Federal Reserve raised interest rates on Wednesday, and rebounded with falling oil prices on Thursday. Since this year, 10-year TIPS and nominal treasury bond yields have risen by 41 basis points and 48 basis points respectively. The spread between the two widened from 2.23% to 2.42%, and fell back to around 2.31% on Thursday. Interest rate strategists at J.P. Morgan Chase pointed out that high real yields, reasonable valuations, and continued inflows into anti-inflationary assets should help support this bond auction. According to the latest data, in August, the US CPI rose 3.4% year on year, and the core CPI rose 2.4%, all in line with general market expectations. For the week ending September 2, the net long positions of TIPS Tier 1 traders were US$2.92 billion, slightly lower than the average of US$3 billion over the past year.

The US Treasury Department will auction a $19 billion 10-year inflation-protected bond at 1 p.m. New York time on Wednesday. The bond yield is expected to hit the highest level since the 2008 financial crisis. Currently, the yield of 10-year TIPS is about 2.63%, and once hit 2.69% in the Wednesday session, the highest since November 2008; the yield of winning the bid in July reached 2.438%, which has already set a record of nearly 18 years at the time. The transaction price of this auction is expected to be about 0.5 basis points higher than the July issue price. Since the recovery in oil prices in mid-year, TIPS has performed relatively better than traditional nominal treasury bonds, but its performance lagged behind for a while after the Federal Reserve raised interest rates on Wednesday, and rebounded with falling oil prices on Thursday. Since this year, 10-year TIPS and nominal treasury bond yields have risen by 41 basis points and 48 basis points respectively. The spread between the two widened from 2.23% to 2.42%, and fell back to around 2.31% on Thursday. Interest rate strategists at J.P. Morgan Chase pointed out that high real yields, reasonable valuations, and continued inflows into anti-inflationary assets should help support this bond auction. According to the latest data, in August, the US CPI rose 3.4% year on year, and the core CPI rose 2.4%, all in line with general market expectations. For the week ending September 2, the net long positions of TIPS Tier 1 traders were US$2.92 billion, slightly lower than the average of US$3 billion over the past year.