BMO's Aaron Kohli expects "small.....>

US TSYS/SUPPLY: BMO's Aaron Kohli expects "small tail" at 11:30am ET $24bn

3-year note auction. "The note's cheapness outright and on the curve are the

biggest inducements for buyers at the auction today, while the greatest risks

facing the 3-year are the combination of the truncated auction schedule, the

event risk of a Fed statement and an important CPI read on Wednesday," he said. 

- "Add to this low Monday-morning volumes and a November downtick in foreign

demand and we are left with a more pessimistic view of the event," Kohli added. 

- Kohli added 3-year notes "appear cheap on an outright basis with yields

slightly off their multi-year high reached early last week. And while we've

taken back some of the relative concession that 3s have been building, the note

still looks cheap on the fly versus 2s and 5s."

- He said "flows are marginally constructive with $201 million coming into the

ETFs we track over the past month. On the mutual fund side, November data showed

some outflows in the sector at $141 million. The net result is slightly positive

with the more recent ETF data from early December showing buying by end users."