*** Traders appear cautiously...........>

US TSYS/10Y: *** Traders appear cautiously optimistic on 1pm ET $20B 10Y

reopening auction, but only as long as WI 10Y stays cheap, said some. Traders

believe it will draw a rate between 2.168% and 2.180%; they expect good US bid,

less foreign bid (lighter Japanese demand potentially, mild Chinese bid) 

- Some believe auction has "decent" price concession, enough for US and foreign

buyers. Others noted 2.18% level is a 30-day moving avg, which mkt held since

early Aug. 

- They urged "go with" whatever is prevailing Tsys direction after auction. "It

will be more of a binary result than usual," said a trader. "If it goes well,

the mkt would recover. If not, the mkt will be nervous into the 30Y auction

Wed." 

- Other traders mentioned mkt had selling Mon and Tues (unwind of last wk's

risk-off rally). "So, maybe it's time to buy," said a trader. "This is not like

your usual selloff: it does not feel like there have been many sell-stops hit." 

- HISTORY: Aug. $23B 10Y auction drew a 2.250% coupon, 2.250% yld, a 2.23%

bid/cover and 57.9% indirects, 6.81% directs, so 35.3% dealers.