BMO analyst Aaron Kohli expects a stop...>

US TSYS/2Y: BMO analyst Aaron Kohli expects a stop "close to the screws" on

11:30am ET $26B 2Y auction as outright and relative "cheapness" is "balanced by

the expectation of risk-positive headlines and a hawkish Fed." 

- He adds "positive seasonals, outright and relative concessions, foreign demand

and a 0.11 yr duration extension shd provide the backbone for the auction. The

Fed's persistently hawkish talk" and "jammed auction schedule offer the most

salient negatives for buyers at the front-end. We'd look to be buyers" mid-next

wk as "risk-positive headlines around tax cuts and Powell's nomination give way

to a focus on the potential for a govt shutdown." 

- He adds 2s cheapened on relative basis thru Nov. on "curve-wide flattening

continued." Despite last wk's "short steepening move", 2s "held onto their

concession with yields 17 bp higher than the Oct auction. 2s have taken the

brunt of the Fed's hawkishness on the curve as well and have cheapened" vs 1s

and 3s on "1s/2s/3s (Tsy and swap) fly." That's because "2-yr is most sensitive

to the timing of Fed hikes and will suffer the most as the Fed sounds more

assured of the December hike or tries to price in more hikes for 2018."