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Traders are cautiously optimistic the....>

US TSYS/2Y
US TSYS/2Y: Traders are cautiously optimistic the 1pm ET US$26B 2Y auction,
which they feel will go at 1.454% to 1.462%.  Some eyed potential Jpn demand,
and Asian central bank bid at 2Y sale. "I don't know how heavy the Jpn bid will
be," said trader. "They are not in a huge buy mode. It could be a little
lighter." But there is enough uncertainty about North Korea that the 2Y auction
shd go well." 
- Nomura N.Amer. hd rate research George Goncalves and analysts Stanley Sun and
Penglu Zhao said 2Y cld be aided by "reemergence of geopol. uncertainties could
drive some flight-to-safety bids to the front end. Front-end valuation cheapened
after last wk's FOMC; hence it could potentially draw-in investors." But
challenges: "foreign central banks' US Tsys holdings surpassed the 2015 high. It
is unclear how much further room there is for foreign central bk buying."
- TD analysts: Tsy to raise $101B this wk amid 2Ys, $34B 5Y and $13B Reopen 2Y
FRN Wed, $28B 7Ys Thu. 
- HISTORY: $26B Aug 2Y auctn: 1.345% rate, 1.250% cpn,2.86 cvr,45.8% indirect,
12.2% directs, 41.64% dealers.

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