BMO's Kohli added on the 1pm ET $26B.....>

US TSYS/2Y: BMO's Kohli added on the 1pm ET $26B 2Y note auction that "policy

divergences between the various central banks has manifested as wider spreads

for the 2-year versus foreign securities, though it's not clear that will

correct unless policies converge once again." 

- He adds that "index extension is 0.07yrs which is about average for the index.

We expect buying to start closer to month-end given the average size." 

- But he also warns that "the speculation on Trump's Fed Chair nominee offers

the largest risk for the auction, with investors beating up the front end of the

curve on the possibilities of a Taylor nomination (perceived as more hawkish

than Yellen or Powell). The fact that a nomination could come at any time will

also add to the headline and political risk for the auctions this week and

should elicit a concession." 

- He noted too 2Y "foreign demand has fallen off sharply, dropping to 6.1% in

September (its lowest level since 2013). The silver lining on this cloud is that

there has been a recent uptick in foreign flows, offering us hope that we'll see

better sponsorship at this event."