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BMO analyst Aaron Kohli expects a......>

US TSY FLOWS
US TSY FLOWS: BMO analyst Aaron Kohli expects a "decent reception" at today's
1pm ET $26 bn 2-year note auction, "given the high outright yields and the early
morning concession. 2s remain cheap on an outright basis but are not as cheap on
a relative basis as they were a few weeks ago." 
- He adds 2-year note sector "also faces headline risks due to speculation
around the next Fed Chair and a potentially more hawkish Fed outlook next week,
which remain the biggest obstacles to strong sponsorship at the auction. Solid
seasonals, investor inflows and an increasingly large short base in the futures
sector are also likely to be broadly supportive of demand." 
- Kohli said the "outright concession for 2s is significant with this auction's
yield the highest since 2008." He adds that "2s aren't at the cheapest levels
they've been on a 1s/2s/3s fly, but they're not rich either. We're a few bps off
the cheapest we've seen in a few months and so should get some demand at the
event. We'd admittedly feel much better about owning them ahead of a possibly
hawkish Fed chair announcement with a better relative concession."

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