Treasury Action: supply is heavy in the busy week ahead
Treasury Action: supply is heavy in the busy week ahead that also includes the FOMC meeting and numerous data reports. The Treasury is expected to sell about $250 B in bills and shorter coupons, with $37 B 2-year notes (Monday), a $38 B 5-year (Tuesday), and a $31 B 7-year (Thursday), along with a $17 B 2-year FRN (Tuesday). The two shorter notes were each increased by $1 B versus last month's volumes, while the FRN is unchanged from the August reopening, but is $1 B less than the July new issue. Yields are little changed today, but have cheapened measurably over the week and award rates here would be the cheapest in years, which could help underpin decent demand. The wi 2-year yield is flat at 2.825%, while the 5-year is holding at 2.965%, with the 7-year up fractionally at 3.035%. For the 2-year, this would be the highest stop since mid-2008. The 5-year is at its peak since the fall of 2008. And the 7-year has not seen a 3% coupon since early 2010. The most recent July TIC capital flows data showed private foreign investors bought $41.7 B in Treasury notes and bonds. However, official accounts remain sellers. Analysts believe increasing demand for yield, some worry over slowing global growth, and accommodative policies from the ECB and BoJ, which are holding down EBG and BoJ rates, should bring in buyers, even a tighter Fed policy and increasing supply dynamics.