SocGen analysts Subadra Rajappa,.........>

US TSYS/2Y: SocGen analysts Subadra Rajappa, Shakeeb Hulikatti and Bruno

Braizinha eyed next week's 2/5/7Y note auctions and expected a "richening of the

3y note versus 2s and 5s going into the 2y auction." They expect next week, "the

Treasury will issue $26bn in 2y and $34bn in 5y on Monday, and $28bn in 7y on

Tuesday. Both the 2y note and the 5y note auctions are scheduled to take place

on the same day and likely at 11.30am and 1pm respectively. Our monitor for the

curve dynamic around previous auction cycles highlights a tactical long the

belly on the 2s3s5s fly, positioning four days prior to the 2y note auction and

exiting four days after the auction. The position has an average return of 3.3bp

and a hit ratio of 100% over the past 12 auction cycles."

- They urge "buy the 3y note in the 2s/3s/5s fly The trade has an historical

average return of 3.3bp and a positive roll/carry. The trade has resulted in a

positive return every month around the 2y note auction over the last year."

- They said the 3-years "tend to outperform on 2s/3s/5s fly going into the 2y

note auction" but also warned of a risk of "further cheapening of 3y relative to

the wings."