Treasury 3-year auction outlook:
Treasury 3-year auction outlook: the $24 B sale kicks off the $62 B August refunding, and will also compete with a heavy corporate slate. The advent of supply has put some pressure on Treasuries as the market sets up for the offerings, and the cheapening could help the auction at the margin. However, light, summer trading conditions and the FOMC's normalization path may make for lackluster results. The when issued 3-year yield is marginally cheaper at 1.530%, in line with where it traded last Wednesday at the time of the supply announcement. A stop here would be about the middle of the range of recent award rates. The note is semi-attractive on the curve, trading at the narrow ends of the 3s-10s and 3s-5s spreads, at 75.7 basis points and 30.8 basis points, respectively. And it's little changed on the 2s3s5s butterfly at 42.3 basis points. The note is not trading tight in repo, though shorts increased slightly in the JPMorgan "all client" Treasury survey. There is the potential for a bid on debt limit uncertainties and the worry that some auctions could be been_delayed , but that's more likely to show up in the September offerings. The indirect bid should be decent given many shorter dated sovereigns overseas trade with negative yields. The July auction was average, stopping at 1.573% and garnering a 2.87 cover (2.81 average) and a 52.6% indirect bid (52.6% average). Direct bidders took 9.9%, with primary dealers taking 37.6%.