*** Traders are cautious into 1pm ET....>

US TSYS/30Y: *** Traders are cautious into 1pm ET US$12B 30Y reopening though it

may be enough price concession is in to draw a mild bid. Traders eyed US demand,

moderate Asian (Japanese & Chinese) bid, perhaps European bargain-hunting (US

30Y WI 2.7876% is good bargain vs. Austria EUR 100-year bond at 2.11%.) Traders

noted 30Y traded well on curve amid flattening; 5/30Y -1.1 bps flatter on day. 

- SMRA's John Canavan: 30Y auction raises all new cash as did 10Y. 

- Nomura's George Goncalves, Stanley Sun, Penglu Zhao: "persistent low vol

environment may continue to favor flatteners and help long-end takedown. An

extension on debt ceiling suspension may further dampen the likelihood of

Treasury's ultra-long bd issuance this year, which will be duration-friendly."

They say long-end relative valuation on swap looks rich relative to positioning,

which may reduce some demand interest;" "risk on" mood "and declining foreign

interest could also be headwinds for the auction." 

- HISTORY: Strong Aug. 30Y auction: 2.818% rate, 2.750% coupon, and a 2.32

bid/cover; solid 66.8% indirects, 5.4% directs, leaving only small 27.82% for

primary dealers.