BMO's Ian Lyngen eyed strong 5Y note.....>

US TSYS/5Y: BMO's Ian Lyngen eyed strong 5Y note auction demand and said such

results "were consistent with 5s/30s flattening unwinds as well, with the

largest portion on record being allocated to customers (i.e. indirects and

directs), leaving the primary dealers with just 17.5%. By definition, auctions

bring out buyers, but the aggressiveness of bidding for this month's 5-year was

notable, given the outright level of yields and as the pivotal 1.750% resistance

was broken."

- He added 2-year auction "didn't meet the same strong demand, although the

bearish tone and general expectations for a front-end supply pickup post

debt-ceiling/SOMA rollover certainly didn't help the sector. The early auction

schedule surely limited the setup potential for 2s (to a lesser extent 5s) and

this, at least, contributed to the soft sponsorship in 2s and was apparently

less of a factor for the belly of the curve. We won't take away too much

directionality from these first 2 auctions, and will instead wait to see the

level of non-dealer sponsorship 7s are able to draw."