Treasury 10-year auction outlook:
Treasury 10-year auction outlook: the $24 B 10-year is the second leg of the $66 B Feburary refunding. Yesterday's 3-year sale was so-so, tailing out to 2.280%. That was the highest award rate since May 2007, which resulted in a 3.13 cover, the best since December 2014. Pricing is likely to be difficult on this offering too given all the wild swings in recent sessions. However, there's a little more calm in the markets and that could be supportive. Yet today's rally in Treasuries is limiting any concessions, and the when issued is 2.5 bps lower at 2.775%. That's nearly 20 bps cheaper than the January auction and a stop here would be the highest since February 2014, which could entice traders. Meanwhile, the note trades special in repo, and could see a decent short covering bid as well. This sale should be relatively immune to the potential debt limit, government shutdown imbroglio. The note should see a decent bid from overseas accounts as spreads remain wide, still over 200 bps to the German Bund. The increased supply, with the volume $1 B greater than in auctions going back to mid-2015, and prospects for further hikes, may weigh a bit on the bid cover. The inflation outlook is still relatively tame, though the recent worries over rising prices may keep marginal buyers sidelined. The $20 B January reopening was better than average, stopping at 2.579% and seeing a 2.69 cover (2.44 average) and a 71.4% indirect bid (63.9% average).