Treasury 3-year auction outlook: the $38 B 3-year sale
Treasury 3-year auction outlook: the $38 B 3-year sale is the first of the 3 refunding auctions, which also include a $27 B 10-year note (Tuesday) and a $19 B 30-year bond (Wednesday). This might be the best of the offerings given the demand for safety amid rising geopolitical risks, and as the FOMC is sidelined for the foreseeable, with an easing priced in as the next move. However, the earlier cheapening in the when issued yield has faded and it's now 1 bp richer at 2.240%, and is 6 bps below April's 2.301% award rate. In fact this would be the richest award rate since January 2018. It's also below a lot of bill rates. Nevertheless, it should garner a good direct bid. It's also very attractive against foreign sovereigns where many trade in negative territory, with dovish outlooks on the ECB. Indeed, it offers a 285 bp yield pick up to the German Schatz. The note does have to compete against a solid corporate calendar today and expected for the week. The April auction stopped at 2.301% and saw a 2.49 cover (2.60 average) and a 42.7% indirect bid (46.0% average). Direct bidders accepted a hefty 18.7% direct bid, the highest since September 2014.