And SMRA's John Canavan said "barring....>

US TSYS/2Y: And SMRA's John Canavan said "barring a surprise jump in what has

been poor foreign demand for 2-year notes in recent months," the 1pm ET $26B 2Y

auction "may be a bit of a struggle."

- He added Tsy cited "the possibility that the 2-year and/or 5-year note

auctions could be reopenings. If the 2-year note auction stopout rate is

anywhere from 1.625% to 1.749%, it will automatically be considered a reopening

of the 1 5/8% of 12/31/19 old 5-year note, of which there is already $35B

outstanding." But he cited "little chance of the 2-year note auctioning being a

reopening."

- He noted 2-year yield "jumped steadily from a low of 1.25% on Sept 8th" to a

recent high of 1.895% last Friday, "highest the 2-yr yd has been since September

2008. We look for at least 3 rate hikes in 2018, and the market still hasn't

fully priced that in, so the 2-yr yd is likely to continue to climb."

- He said "the 1 7/8% coupon may look slightly attractive to some market

participants, but the 2-yr auctions have turned decidedly more mixed in recent

months as the yld has surged, and we expect" mixed 2Y auction "at best as well.'