Tsys mildly higher, rangebound,..........>

US TSYS/7Y: Tsys mildly higher, rangebound, despite light shorts set into 1pm ET

US$28B 7Y auction. BMO analyst Aaron Kohli is "cautiously optimistic" on 7Y

auction though "frankly we don't expect the results will be particularly

influential for the overall direction of the Treasury mkt." 

- Kohli said "while the 7-year appears rich on the curve, we nonetheless see

some value in holding it due to its relative shelter from hawkish Fed actions in

a period of potential policy uncertainty. Also, as a play for month-end and a

potential government shutdown it should prove attractive. On net, we're looking

for above average non-dealer awards and would play for a modest stop-through." 

- He added with Mon "demand for the 2- and 5-yr auctions slightly hampered by

the truncated auction schedule, the 7-yr stands as the last nominal supply

before month-end and the fairly long duration extension. Due to this, we expect

strong demand as managers use the auction as an opportunity to rebalance their

portfolios going into month-end." 

- HISTORY: Oct. $28B 7Y auction: 2.280% rate, 2.250% cpn, 2.39 bid/cover; 63.5%

indirects; 13.31% directs, 23.24% primary dealers.