Well,
If you are refering to the Blue bug on the torque indicator it is only a recommended setting for cruise performance. And it definetly decreases as altitude increases. You should look at your POH to get climb and cruise performance charts and notice that the higher you climb and cruise, the lower the torque setting allowed.
Max Cruise at ISA and 1900rpm: (for a 675 SHP engine)
12000 Ft 1563 ft-lbs
14000 Ft 1469 ft-lbs
16000 Ft 1371 ft-lbs
18000 FT 1277 ft-lbs
Same goes for climb performance