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
