Treasury 10-year auction outlook: uncertainty over the midterms

Treasury 10-year auction outlook: uncertainty over the midterms could crimp auction demand today after a poor 3-year sale yesterday. With the election results having massive implications for the next couple of years, traders may prefer the sidelines awaiting more clarity. Also, the when issued rate is 0.5 bps richer today at 3.195%, and 3 bps below October's 3.225% stop, while the curve is slightly flatter, making for a tough buy, and especially with some concern over rising inflation, though breakevens are still relatively low. The increased volume with $27 B on the auction block, up from the $23 B October refunding and $26 B for the August refunding may weaken the cover ratio. Meanwhile, there's $106 B in bills on offer today as well, and they are competitive with 2-handles on 4-week, 8-week, and 52-week tranches. The note may garner a short covering bid, though it's the 30-year bond that's special in repo. Additionally, indirect bidding should remain solid with spreads still quite wide (+277 bps versus the Bund). The October auction stopped at 3.225% and saw a 2.39 cover (2.51 average) and a 64.5% indirect bid (63.1% average). Direct bidders took 5.4% last month, while primary dealers took 30.1%.