TIPS

The US is increasing its sales of treasury inflation protected securities (TIPS) in response to Chinese interest. While TIPS will remain a tiny market on comparison to the $6.66bn US government bond market, it looks like we could have $10bn in new supply flowing into a market which issued just $44bn in the nine months to June 2009. That's a lot of new supply in relative terms. The TIPS market fell on the news, no doubt due to fears of this potential oversupply, but might there be a positive angle to this development?