Treasury 7-year auction preview:
Treasury 7-year auction preview: the $31 B sale is expected to see decent, to slightly better than average results. The note has cheapened 1 bp today to 2.855% and is just over 8 bps higher since Friday. However, it's richer than the 2.930% for the $30 B July offering. The 2s-7s gap has widened slightly too. The note should also benefit from month-end, especially as Barclays duration index is estimated at 0.11 years (since this is a refunding month that includes new 10- and 30-year paper). A short covering bid is also anticipated, while the advent of the long Labor Day weekend could bring some buyers in given some ongoing risks with respect to global trade issues, as well as concerns over China, Turkey, and Italy. And it offers a 282 bp yield pick up versus the German maturity. On the other hand, the 2- and 5-year legs have been so-so as demand for Treasuries has waned generally. Also, the $1 B increase in size might limit the bid cover ratio. The $30 B July auction stopped at 2.930% and had a 2.49 cover (2.52 average) and a 64.6% indirect bid (64.2% average). Direct bidders took 12.0%, while primary dealers were awarded 23.4%.