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US TSYS/3Y: ### POV: Traders report some foreign accounts may be tempted to skip
today's 1pm ET $24B 3Y note auction, as they could make more money lending out
US dollars in the foreign exchange basis market. Here are the numbers; the
account could buy the WI 3-year note Treasury and get a 1.752% rate (based on
current 3Y WI); but it also could do US$ lending at a 1.9% rate, and thus in
theory obtain more yield.
- But it would seem the 3-year note auction today will not struggle too much:
it's not that much supply, and the new Fed Chair Powell is considered to be
relatively continuous in the Fed Chair Yellen mode. It was also expected that US
accounts would have good demand near current levels. "It's not that much supply:
it's not like a $34B 5Y note auction," summarized one trader.