Traders express some cautious optimism...>

US TSYS/7Y: Traders express some cautious optimism into the 1pm ET US$28Y 7Y

auction with domestic and foreign bid eyed. "I expect US and foreign buyers,"

said one trader. "It may back up a little" in yield to get sufficient demand, he

added.

- But BMO's Aaron Kohli expressed some caution on 7Y auction foreign buying as

that had "dropped in September to the lowest level since March at 10.3%. We

haven't seen the sustained uptick in foreign inflows we expected with MoF data

last night showing a flat read for the week ended October 20 though that may be

partly due to the lack of auctions in that week (save TIPS). Treasury index

extensions are in line with average at 0.07 but we should see some buying at

month-end."

- HISTORY: Sept. $26B 7-year note auction drew a 2.150% rate, and a solid 2.70

bid cover, with a large 70.64% indirect rate, a 19% direct rate leaving only a

tiny 10.41% for dealers to mop up.