Treasury 10-year auction preview: the auction should do ok
Treasury 10-year auction preview: the auction should do ok with better than average stats likely. The market has come under some pressure ahead of the $24 B offering, as Wall Street remains firmly higher. This late set-up may help sponsor a decent bid. The wi yield is little changed at 2.80%, having risen from the 2.745% low overnight. But, it's 22 bps cheaper than the 2.579% from January's reopening. It looks relatively attractive on the curve. And it would provide a 208 bp yield pick-up versus the German Bund. Trading has calmed from the wild swings recently and the more stable conditions should support. Other positives include the highest award rate in three years. The note is on special in the repo market, suggesting a short covering bid. Inflation worries have eroded somewhat too. The sale should be relatively immune to the potential debt limit, government shutdown imbroglio. On the negative side, demand for Treasuries has generally been slipping. Supply is expected to increase measurably this year (today's offering was hiked by $1 B). Some uncertainty over the Fed outlook may leave the marginal buyer 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). Direct bidders took 6.5%, with primary dealers accepting 22.0%.