Treasury 30-year auction outlook:
Treasury 30-year auction outlook: the record $18 B sale completes the August refunding. So far demand has been average to lackluster, but today's offering could be the best of the bunch after the benign PPI report. However, the subsequent rally has richened the market, taking the when issued yield down 2 bps to 3.095%. It's about 14 bps cheap to the July reopening, but the lack of a concession today could limit buying at the margin, especially ahead of the more key CPI data on Friday. Additionally, the increased auction size could be a drag on the cover ratio. Nevertheless, the slightly steeper curve is a positive. The sale may also benefit from a short covering bid with the auction relatively tight in repo, along with the 10-year note. The new note is also popular for indexed funds, insurance companies and the like. It also trades with a favorable spread to foreign sovereigns, with a 275 bp pick up versus the German 30-year. The $14 B July reopening stopped at 2.985%, with the $17 B May refunding bond at 3.130%. Last month's sale saw a 2.34 cover, and 2.38 in May (2.39 average). Indirect bidders accepted 61.9% last month and 62.7% in May (62.5% average).