HALISTER1: RESEARCH ROUNDUP: $34b UST 5Y Auction May Benefit From Valuation

RESEARCH ROUNDUP: $34b UST 5Y Auction May Benefit From Valuation

(Bloomberg) -- Positives for auction at 1pm ET include outright yield and valuation on curve, cheapness on global scale; negatives include Fed posture, recent history of tails and sector’s volatility.
  • BMO (Aaron Kohli)
    • 5Y notes “are not really cheap enough” based on Fed posture, however auction liquidity and refunding month should bring in enough buying to avert a tail
    • Positives include strong reception for yday’s 2Y, recent cheapening outright and on curve, cheapness on global scale
    • Negatives include hawkish Fed, recent tendency for 5Y auctions to tail; also, yday’s stop through by 2Y may curb dealer bid today
  • CRT (Ian Lyngen)
    • “Apprehensive” based on “consistently weak receptions and the broader Fed-inspired bearishness”; however, auction should benefit from outright yield and oversold technical landscape
  • Nomura (unsigned)
    • Positives include outright yield and valuation on curve, as with 2Y yday; spreads vs G4 approaching wides; improved carry/roll profile after recent selloff
    • Negatives include highest volatility on curve, recent gains for energy prices
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Aaron Kohli (Bank of Montreal)
Ian Lyngen (CRT Capital Group LLC)

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