PREVIEW: USD 54bln 3-year Note Auction at 13:00 EST/18:00 GMT

SUPPLY: The Treasury will auction a new 3-year note (USD 54bln, Monday), a new 10-year note (USD 41bln, Tuesday) and a new 30-year bond (USD 27bln, Thursday); this week, some USD 120bln of cashflows fall due, including USD 78bln of redemptions and USD 42bln of coupons. UBS also notes that the Treasury will next week auction a new 20-year bond (18th Nov, size expected around USD 27bln), and in the month-end auctions, will auction a new 2-year note (23rd Nov, expect USD 56bln), a new 5-year note (23rd Nov, expect USD 57bln) and a new 7-year note (24th Nov, expect USD 56bln); the week beginning 30th November will see around 105bln of cashflows falling due.

3-YEAR PREVIEW: BMO says that while there were mixed expectations on whether the Treasury Department would ultimately decide to once again boost coupon issuance, the fact that there was little discernible price response in the wake of the announcement leaves the bank less concerned that the increase will drive any meaningful hesitation at this week’s auctions. And as the dust settles from the election, BMO notes that the fact that yields have been able to put meaningful distance between current levels and the decision day lows should inspire some dip-buying interest. The bank adds that the steepening nature of the moves adds incentive for investors to extend duration and capture some increased yield. "While we by no means expect any meaningful issues in underwriting the new supply, it is worth acknowledging that sentiment continues to lean bearishly on Treasuries," BMO writes, "this is evident not only in the positional data but also as attention shifts away from politics and back toward the data – with the response to October’s jobs numbers as the latest example." Accordingly, the bank does not rule out modest tails at this week's sales should some investors opt to wait for more attractive buying opportunities in the weeks and months ahead.

3-YEAR RECENT AUCTION HISTORY:

• High-yield: (prev. 0.193%, six-auction average 0.207%)


• Tail: (prev. 0.2bps, six-auction avg. 0.1bps)


• Bid-to-cover: (prev. 2.44x, six-auction avg. 2.45x)


• Dealers: (prev. 31.7%, six-auction avg. 32.7%)


• Direct: (prev. 12.6%, six-auction avg. 13.1%)


• Indirect: (prev. 55.7%, six-auction avg. 54.2%)

09 Nov 2020 - 17:37- Fixed IncomeResearch Sheet- Source: Newsquawk