Traders generally expect OK US and.......>

US TSYS/7Y: Traders generally expect OK US and foreign demand at 1pm ET US$28B

7Y auction and expect a 2.148% to 2.154% rate; but market also has some jitters

on tax cut talk, Fed Chr Yellen Dec rate hike hint, and view Tsys might be

overvalued. Traders cited following PROS/CONS list for auction: 

- PROS: 1) Should be US and Japanese demand; 2) Dip buyers after recent sales;

3) Tsy 7Y notes fairly cheap; 4) Aug. 7Y auction proved very good. 

- CONS: 1) Mkt uncertainty into potential Dec rate hike; 2) View mkt may be

overvalued; 3) Some Jpn accts may not want to buy until month, qtr- and

Jpn-half-year end have blown over after Friday. 5) Tax cut hopes may dampen

demand but some noted the tax cut process will take months. 

- Nomura N.American head of rate research George Goncalves and analysts Stanley

Sun and Penglu Zhao said "recent sharp selloff might help attract buy-the-dip

investors. A persistent low vol environment may continue to support demand for

belly." 

- HISTORY: Strong August 7Y auction: huge 68.80% indirects, 16.6% directs left

only puny 14.61% for dealers to digest.