Treasury 3-year auction outlook: the $33 B auction leads off
Treasury 3-year auction outlook: the $33 B auction leads off the $69 B in coupon sales this week, and will be followed by the $22 B 10-year and $14 B 30-year reopenings on Wednesday and Thursday, respectively. When issued yields have cheapened as the market sets up for the offerings. The wi 3-year is 1.5 bps higher at 2.680%, with the 10-year up 1 bp at 2.870%, and the bond up 4 bps to 2.990%. On the 3-year, a stop here would be fractionally cheaper than the 2.664% award rates from May and June, and would be the highest since February 2007. The note is attractive on the curve at a narrow 19.6 bps versus the 10-year, from 25 bps a couple of weeks ago. These factors might not help the offering much, however, ahead of a widely expected rate hike in September, and potentially one in December too. Additionally, the auction size was boosted by $1 B and is up from $24 B in January, with more increases expected this year. The JPMorgan Treasury client survey showed declines in both long and short positions. However, concerns over tariffs and the negative implications for growth are supportive at the margin. Additionally, it offers a 326 bp yield pick up to the 3-year German sovereign, which continues to trade in negative territory at -0.585%. The June auction stopped at 2.664% and saw a 2.83 cover (2.91 average) and a 51.4% indirect bid (52.4% average). Direct bidders took 9.2% last month, while primary dealers accepted 39.4%.