Tsys hovered nearly at the day's price...>

US TSYS/7Y: Tsys hovered nearly at the day's price lows, amid pre-auction shorts

into the 1pm ET $28B 7Y note auction, which is expected to draw a 1.953% to

1.960% rate. Some anticipated US, Asian and European buyers. "There was a

rebound in equities and the dollar is strengthening," said one trader. 

- A different trader said the auction would only draw "not good demand," as 7Y

note may be a bit pricey. 

- But a different trader disagreed and said demand "would be pretty good." 

- Some traders said the market is a bit choppy with unusual correlations for

example, the risk-off rally occurred mainly in the UK session, as opposed to

occurring in Asia, when N.Korea missile firing was over Japanese land. 

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

Sun and Penglu Zhao: The "long Labor Day weekend may bring forward month-end

flows and boost 7yr demand." They added some "dovishness" from Jackson Hole Fed

conference "may help demand." 

- HISTORY: July $28B 7Y auction drew 2.126% high yield, 2.54 cover, strong 67.7%

indirects, 11.64% directs leaving only 20.62% for primary dealers to mop up.