Treasury Action: Treasuries are trying to catch up to bond gains in Europe
Treasury Action: Treasuries are trying to catch up to bond gains in Europe, with the latter attributed in part to French election jitters. There's also talk that the Trump reflation trade is getting long in the tooth. The consequent rally in Treasuries is limiting any concession building ahead of supply. Treasury is auctioning $88 B in shorter coupons in the holiday abbreviated week ahead, kicking off with the $26 B 2-year on Tuesday, with $34 B in 5s on Wednesday and $28 B in 7s on Thursday. There's also a $13 B 2-year FRN reopening on Wednesday. When issued (wi) yields are sharply lower with the wi 2-year down 3 bps to 1.215%; the wi 5-year is off 4.5 bps at 1.900%; the 7-year has fallen 5 bps to 2.230%. Though stops at these levels would be some of the highest in years, the returns may nevertheless not be attractive enough to elicit much demand, especially given uncertainty over a potential Fed rate hike next month. Yet, curve flatteners may help support to some extent. Indirect bidding should remain decent too given still wide spreads to foreign sovereigns.