Treasury 30-year bond outlook: the $13 B reoening is cheapening

Treasury 30-year bond outlook: the $13 B reoening is cheapening as yields edge higher on unwinding of some geopolitical risks and a surging Wall Street. But there are many pros and cons. The when issued 30-year is up 3.5 bps at 3.035%. That may underpin some better sponsorship at today's sale. The lack of a concession at yesterday's 10-year resulted in tepid results. But despite today's back-up, a stop at the current level would nevertheless be the richest award rate since January's 2.867%. The bond isn't tight in repo, suggesting a limited short base, although there are natural buyers for the offering. Analysts don't see an urgency to be a buyer though as auction sizes should be on the increase most every quarter. The $13 B reopening size is $3 B below the $16 B from the February refunding, but unchanged compared to the March reopening (which was $1 B higher than in January). Yet, current uncertainties over Syria and trade could underpin some demand today, along with the natural buyers. On the other hand, some signs of rising inflation, along with WTI oil having tested $67, could cap demand. Indirect bidding should remain healthy, however, thanks to wide spreads (186 bp premium to the German sovereign) and demand for yield. The March reopening was decent, stopping at 3.109% with a 2.38 cover (2.35 average) and a 57.9% indirect bid (62.6% average).