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Preview 5Y Supply

US TSYS/SUPPLY
  • The upcoming $46B 5Y supply is $1B smaller than last month, with yields currently some 37bps lower despite climbing notably off intraday lows.
  • The prior five auctions have seen an average tail of 0.7bps (heavily weighted by the 3.4bp tail last month), with the June auction also seeing a slide in bid-to-cover at 2.28x (5 auction av 2.43x) and indirect take falling to 56.5% (5 auction av 62.2%).
  • JPM noted yesterday that the WI roll opened at +0.25bp before trading at -0.35bp, in excess of the erosion of carry, whilst expecting to require some further concession from current levels.
  • BMO note that yesterday’s 2-year stopping solidly through, despite the lack of concession early today for 5s, suggests less hesitation to buy ahead of the Fed than would otherwise be expected. However, they still suspect there needs to be larger concession either via an intraday downtrade or tail at the event itself.

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