SMRA's John Canavan looks for a..........>

US TSYS/7Y: SMRA's John Canavan looks for a "better" 1pm ET US$28B 7Y auction

compared to Monday's 2Y, 5Y auctions. "Investment fund demand should steady this

month, after falling last month from September's record allotment, and we expect

the foreign bid should improve at least modestly this month after falling to a

record low last month."

- "The 2-year, 5-year, and 7-year coupon auctions this week will raise a

combined $4.726 bln when the auctions all settle on Thursday," he said. "The

2-year note auction will raise just $0.001 bln, the 5-year note auction will pay

down $0.930 bln, and the 7-year note auction will raise $5.655 bln."

- The Fed "holds approximately $0.070 bln of the maturing 5-year note, or 0.20%

of the outstanding issue, and approximately $7.799 bln of the maturing 7-year

note, or 25.87% of the outstanding. However, beginning last month, the Fed will

roll over only the portion of monthly maturing issues that exceeds $6 bln. That

cap will be raised to $12 bln for the 1Q of next yr, $18 bln for the 2Q, $24 bln

for the 3Q and $30 bln for the 4Q."