Preview: $58B 3Y Note Auction

Tuesday sees the first Tsy coupon auction of the month: new 3Y Note (91282CCG4) for $58B.

• Background: This auction serves as a front-end prelude to 10Y and 30Y supply later this week which is likely to be more closely watched, especially after Tuesday's rally (and the latter taking place after the release of May CPI data).
• The 3Y sale is perhaps not as impactful as it would be if the June FOMC were considered a meaningfully "live" event, with short-end rates set to remain anchored for the foreseeable future. But it will be interesting to see how much the downside pressure on short-term rates (amid soaring ON RRP takeup) sets the tone. Note that late May saw a strong 2Y auction, attributed in part to hunger for yield at the short end.
• 3Y WI is currently just 0.3009%, with yields down nearly 3bps since Friday's jobs data. But the curve's bull flatter since then (and 3Y5Y down 4.5bps) so there may be some relative appeal.
• Auction history: The 3-Yr was last sold on May 11, at high yield 0.329% (small stop through vs when-issued yield of 0.330%) with a 2.42x bid-to-cover. Primary dealers took 32.2%, with 49.6% indirects and 18.1% directs. Last 5 auction average stats are below - each of those offerings were also for $58B and collectively were "on the screws" with high yield averaging 0.298%. 3s haven't tailed since January.
• Timing: Results available shortly after competitive auction closes at 1300ET.

Last 5 3Y Auctions Average: