US to sell USD 28bln 3-year notes at 1530 GMT (1130 eastern time)

US to sell USD 28bln 3-year notes (new issue) on Monday 12 Mar 2018 at 1530 GMT (1130 eastern time).

The US Treasury will auction $62bln in 3-year notes ($28bln, Monday), 10-year bonds ($21bln, Monday) and 30-year bonds ($13bln, Tuesday). With a total of $24bln maturing at mid-month settlement, $38bln in new supply will be raised. NOTE: the condensed auction schedule is to allow for one business day between the 30-year auction and mid-month settlement on Thursday 15 March.

Three-year notes have cheapened as markets price in a more aggressive Fed rate hike trajectory, while the increase in issuance announced by the Treasury has also weighed. Recent auctions have cleared close to the WI. Analysts note that foreign demand has been easing, but domestic demand has firmed.

Barclays points out that current 3s appear fair on the curve, but there are no indications of a short base, since the issue is not trading special in repo, as it has tended to do at this stage of the auction cycle. The bank has recommended going long the WI versus current 3s (on Friday), as it believes the former is trading cheap.

3-year auction history:
– High yield: (prev. 2.28% vs six-auction average of 1.855%)
– Tail: (prev. 0.4bps tail vs six-auction average of 0.2bps tail)
– Bid-to-cover: (prev. 3.0x vs six-auction average of 3.09x)
– Dealers: (prev. 40.5% vs six-auction average 37.9%)
– Directs: (prev. 9.7% vs XX six-auction average 9.2%)
– Indirects: (prev. 49.8% vs six-auction average of 54.6%)