Diode connected transistor for voltage biasing
Since M2 is in saturation, the voltage at gate of M2 is greater than that at source.
$$V_{G2}&gt;V_{S2}$$
But since both the gates are connected and source of M2 is connected to drain of M1,
$$V_{G1}&gt;V_{D1}$$
Which can be re-written as,
$$V_{DS1}&lt;V_{GS1}$$
So M1 works in saturation.