Tuesday , 25 February 2025
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US set to sell seven-year notes

Look out for the results just after the top of the hour.

Here are some pros and cons from BMO:

Pros

  • We
    haven’t seen a coupon auction tail since the 3-year offering on June 10th.
    Since then, 2s, 5s, 10s, 20s, 30s, and 5-year TIPS all stopped-through
    with above-average non-dealer allocations driven by elevated indirect
    bidding.
  • Over
    the last decade, we’ve only seen three 7-year auctions tail during June,
    and seven stop-through. Framed another way, only one of the last six
    7-year auctions during June tailed (2022), with the other five auctions
    stopping through and by an average of 0.4 bp.
  • 7-year
    supply has been generally well-received in 2024 with three auctions
    stopping through (Feb/Mar/Apr) and two tailing (Jan/May) – but even
    January’s tailed auction (0.3 bp) saw above-average non-dealer
    participation.
  • Overseas
    buyers have taken a growing allocation over the last 3 months and May’s
    19.0% award represented the highest since January 2023.

Cons

  • The
    macro narrative is unlikely to be materially shifted or confirmed until
    the July 11th release of June CPI which may serve as an offset to
    aggressive bidding this afternoon.
  • The
    bearish impulses of Aussie and Canadian CPI combined with Japanese
    intervention fears may leave a subset of buyers hesitant to buy 7s at the
    moment.

Fed-speak has been very consistent in the
message that more convincing is needed to be confident inflation is on a
sustainable path to 2%, and there remains an elevated degree of uncertainty
whether the FOMC will cut in September or delay further

This article was written by Adam Button at www.forexlive.com.

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