Bond market is waking up to inflation
For the first time since Jan 2003, TIPS are now traded at prices significantly above par. At the 04/10/2008 auction, 9-year 9-months TIPS offering 1.625% were sold for 104.35362. (For reference: only 3 months earlier, a 10-year, 1.625% TIPS sold for 99.724557).
It has been quite a while since investors were ready to pay such a premium for an illusory chance to beat inflation. The previous record, $106.474, was established on 01/08/2003, but that 9-year 6-months TIPS at least offered 3% coupon rate. Apparently, market participants have come to the conclusion that even with their usual lies and distortions, the BLS can't avoid admitting a 4% official inflation.