Treasury 3-year auction preview:
Treasury 3-year auction preview: the auction should go pretty well given the tariff worries and resulting flight to safety. That's richened the wi note outright 1 bp to 2.245%, and it's nearly 6 bps below April's stop, and would be the richest going back over a year (to January 2018). However, the underperformance of the front end has seen curves narrow and that will be supportive. The FOMC is also out of the picture for now, with many in the market pricing in a rate cut as the next action. The Fed also continues to see tame inflation, so the upcoming PPI and CPI reports should have little impact today. The note should be attractive to overseas accounts where the Treasury offers a significant yield pick up as most short dated sovereigns continue to trade in negative territory, and as outlooks on the ECB remain very dovish. Meanwhile, shorts were have been covered in recent sessions, and that should limit a covering bid. Last month's sale was also disappointing. 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 (11.9% average), the highest since September 2014.