Treasury Action: supply is heavy next week
Treasury Action: supply is heavy next week with about $315 B in bills and notes on the docket. But for now, demand is outpacing supply, helping richen yields. The Treasury is selling $113 B in shorter dated coupons, including $40 B in 2-year notes (Tuesday), $41 B in 5-year notes (Wednesday), and $32 B in 7-year notes (Thursday). Additionally, there is a new $20 B 2-year FRN (Wednesday), as well as $87 B in 3- and 6-month bills (Monday). And analysts expect $95 B in 4- and 8-week bills will be on tap (Thursday). Some haven buying and risk aversion are stymieing any auction set-up with the wi 2-year 3.5 bps lower at 1.555%, while the wi 5-year is off 2.5 bps to 1.550%, with the wi 7-year down 2.5 bps as well to 1.645%. Stops at theses levels would be some of the richest in years, but a lot will depend on what happens with Brexit over the weekend. Also, the market is priced for a 25 bp rate cut at the end of the month, but there's little conviction for further erasing at the end of the year. The markets are awaiting upcoming comments from VC Clarida.