Look out for the results just after the top of the hour.
Here are some pros and cons from BMO:
Pros
We
haven’t seen a coupon auction tail since the 3-year offering on June 10th.
Since then, 2s, 5s, 10s, 20s, 30s, and 5-year TIPS all stopped-through
with above-average non-dealer allocations driven by elevated indirect
bidding.Over
the last decade, we’ve only seen three 7-year auctions tail during June,
and seven stop-through. Framed another way, only one of the last six
7-year auctions during June tailed (2022), with the other five auctions
stopping through and by an average of 0.4 bp.7-year
supply has been generally well-received in 2024 with three auctions
stopping through (Feb/Mar/Apr) and two tailing (Jan/May) – but even
January’s tailed auction (0.3 bp) saw above-average non-dealer
participation.Overseas
buyers have taken a growing allocation over the last 3 months and May’s
19.0% award represented the highest since January 2023.
Cons
The
macro narrative is unlikely to be materially shifted or confirmed until
the July 11th release of June CPI which may serve as an offset to
aggressive bidding this afternoon.The
bearish impulses of Aussie and Canadian CPI combined with Japanese
intervention fears may leave a subset of buyers hesitant to buy 7s at the
moment.
Fed-speak has been very consistent in the
message that more convincing is needed to be confident inflation is on a
sustainable path to 2%, and there remains an elevated degree of uncertainty
whether the FOMC will cut in September or delay further
This article was written by Adam Button at www.forexlive.com.
