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US TSYS/7Y: Traders are cautiously optimistic on the 1pm ET $28B 7Y note
auction, which occurs after today's overnight risk-off rally on N.Korea missile
firing, but also amid profit-taking and short-setting since then to set up for
auction. Traders expected US and foreign (Asia, Japan, China) buying at 7Y
auction. Traders said Monday's strong $34B 5Y note auction provides a better
backdrop for the 7Y note auction, which followed a so-so 2Y auction. 
- Nomura N.American head of rate research George Goncalves and analysts Stanley
Sun and Penglu Zhao: The "long Labor Day weekend may bring forward month-end
flows and boost 7yr demand." They added some "dovishness" from Jackson Hole Fed
conference "may help demand." 
- Traders said midmorning price ebb to get 7Y auction price concession did not
mean there would not be 7Y demand, though there may be a slight tail.
"Everbody's got to have them," said one trader. "Everybody will participate," he
said, eyeing US, Asian and European buyers. 
- HISTORY: July $28B 7Y auction drew 2.126% high yield, 2.54 cover, strong 67.7%
indirects, 11.64% directs leaving only 20.62% for primary dealers to mop up.