Treasuries hover just above session......>

US TSYS/2Y: Treasuries hover just above session low prices amid more shorts into

1pm ET US$26B 2Y note auction. Tsys began NY weaker then pre-auction shorts,

corporate rate-lock hedges. Tsys saw 2/10Y, 2/30Y, 2/5Y, 5/30Y steepeners

despite 2Y auction Tuesday, 5Y auction Wed. But 2Y, 5Y notes tight in RP. 

- Cantor Fitz's Jason Lederer: 2Y shd draw "decent" demand as yields around

highest since financial crisis. 

- BMO's Aaron Kohli noted 2Y auction foreign demand fell off "sharply" to 6.1%

in Sept, lowest since 2013, but since then, "recent uptick" in foreign bond

buying flows spurs "hope of better sponsorship at this 2Y auction. ETF flows

suggest could be demand. But he adds Fed Chair speculation was "largest" auction

risk.

- Nomura George Goncalves, Penglu Zhao: are "slightly bearish" on demand outlook

but "front-end carry/rolls are still attractive", valuations "certainly in the

cheap range" after recent selloff "both outright, on the curve." But they warn

"foreign appetite for front-end has subsided. Attractive US$ lending in FX basis

trade may divert some flows from front-end cash bond buying."