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Preview $61B 5Y Note Auction

US TSYS/SUPPLY
WI running 0.845% / 0.840% ahead the US Tsy $61B 5Y Note (91282CBT7) compared to last month's 0.621% high yield vs. 0.615% WI and 2.24 bid/cover.
Cantor Fitzgerald strategist Justin Lederer expects a "willing buyers" today as rates have calmed some since last Thursday when 10YY tapped 1.7526%.
  • Nevertheless, Lederer wouldn't be surprised "y a concession leading in and/or small tail as participants are cautious with their setups/bids given the recent volatility", with rate hikes starting to price in sooner than later as well as underlying trepidation ahead Thu's 7Y note auction that tailed 4.5bp last month.
Citing foreign acct participation, BMO strategists said they "do not see evidence of a stepback in foreign sponsorship at the February 5-year auction like we did the 7-year. Nonetheless, given the proximity to Japanese fiscal year-end and the risk that investor base has their Treasury positions aligned until April, there is some downside potential to this afternoon's offering. "
  • BMO said 5s "hold appeal on the curve given the sector led the latest leg of the bearish move in Treasuries, and we still favor coming out of the auction long the note on the 2s/5s/10s butterfly."

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