*** Traders anticipate reasonable........>

US TSYS/7Y: *** Traders anticipate reasonable demand at 1pm ET US$28B 7Y auction

but market also has general jitters on tax cut talk, Fed Chr Yellen Dec rate

hike hint, and view Tsys might be overvalued a bit. Still 7Y auction shd draw US

and foreign demand, said traders. 

- PROS: 1) Should be US and Japanese demand; 2) Could be dip buyers after recent

sales; 3) Tsy 7Y notes fairly cheap; 4) Aug. 7Y auction proved very good. 

- CONS: 1) Mkt uncertainty into potential Dec rate hike; 2) View mkt may be

overvalued; 3) Some Jpn accts may not want to buy until month, qtr- and

Jpn-half-year end have blown over. 5) Tax cut hopes may dampen demand but some

noted the tax cut process will take months. 

- Nomura N.American head of rate research George Goncalves and analysts Stanley

Sun and Penglu Zhao said "recent sharp selloff might help attract buy-the-dip

investors. A persistent low vol environment may continue to support demand for

belly."

- HISTORY: Strong August 7Y auction: huge 68.8% indirects, 16.6% directs left

puny 14.61% for dealers to digest.