Traders are cautiously optimistic on.....>

US TSYS/2Y: Traders are cautiously optimistic on 1pm ET US$26B 2Y auction but

feel it should back up just a shade more in yield to get sufficient price

concession. The auction was expected to draw both US and foreign bid with

foreign central bank (Asian, Japanese, Chinese potentially) demand also eyed as

potentially showing up too. 

- "We have seen foreign central bank buying during the whole cheapening move" in

the front end for the "past two to three weeks," said one trader. "I would

imagine that they would like it. It offers decent carry." 

- Some traders felt that Friday's Sept. 29th quarter-end might prevent "the

Street from bidding aggressively." 

- But others said the auction "will go just fine," as one put it. "The rest of

the market has backed up. The market is anticipating that the Saudi debt deal

Wed will be heavily weighted toward the back end, so it is steepening. But

you've hit support here." However "you do have Fed Chair Yellen" just "before

the auction, and she could be concerned about inflation," he added. "That might

be enough to have guys cover and get a decent concession."