Treasury 2-year auction outlook
Treasury 2-year auction outlook: the $37 B auction kicks off a heavy week of supply which includes $253 B in bills and coupons. This sale may go ok, finding support from cheaper yields and global uncertainties on trade angst. The when issued yield is little changed at 2.825%, and a stop there would be the highest since mid-2008. And it's 17 bps above the 2.655% award rate from August, where the offering found a decent bid. The wide spread to other sovereigns should be attractive too. The wi provides a 337 bps pick-up to the German Schatz, which should bring in buyers too. And with the ongoing accommodative postures from the ECB and BoJ, the spreads should remain wide for some time. Treasury capital flows data have reflected general demand from private foreign accounts in recent months, though official accounts have been sellers of Treasuries. The note is trading tight in repo, suggesting some short covering may support. The advent of the FOMC may keep marginal buyer sidelined, though. While a 25 bp rate hike is well anticipated, uncertainties over the hawkishness of the policy trajectory may impact. The August sale stopped at 2.655% and garnered a 2.89 cover (2.80 average) and a 43.8% indirect bid (44.7% average), with direct bidders taking 13.7% and primary dealers accepting 42.5%.