Treasury 3-year auction preview
Treasury 3-year auction preview: the $34 B 3-year note might see a decent bid thanks to the concession today. The wi is down 2 bps to 2.765%. A stop there would be 8 bps cheap to the July sale, and would be the highest since May 2007. Higher rates haven't necessarily helped recent auctions, however. Additionally, a like 25 bp Fed rate hike in September and another perhaps in December are headwinds. Auction volumes have been on the rise too, given the growing budget deficit. Today's $34 B amount is the most since Augsut 2010, and more increases across the curve are on the way. Market positioning may support the sale, however -- the JPMorgan Treasury "active client" survey showed an increase in shorts to 40 from 20. But the note is not particularly tight in repo. And, there remains a very wide spread to foreign sovereigns, many of which still trade in negative territory, though indirect bidding has been mixed. The note offers a 323 bp yield pick up versus the equivalent German maturity. The July auction stopped at 2.685% and saw a 2.51 cover (2.88 average), which was the lowest since January 2009, while indirect bidders took 39.6% (51.3% average), which was the weakest since 2014. Direct bidders took 9.1% last month, with primary dealers accepting 51.3%.