09 Feb 2006 17:20 GMT
US TSYS/30Y: Traders hold optimistic, but cautious view on 1pm ET $14B
30Y sale, brace for wild post-auction trading up/downside. PROS: 1) Some
say institutional investors sold Tsy intermediates to buy 30Y at
auction. 2) Swap, Street, hedge funds and U.S. and European real money
could surface. 3) Pension fund demand will eventually surface in
the 30Y, not necessarily right now though. 4) Prices suggests demand for
issue, as roll is -12 bps vs. current 30Y. 5) There is a US$3.7B 20Y
issue maturing, which could in theory mean some reinvestment demmand. 6)
Current 30Y is trading on special, 3.15%, in overnight repo; suggests
good 30Y area bid. CONS: 1) This is first 3Y/10Y/30Y refunding slate
since 2001 so remains some uncertainty. 2) Asian central bank bid
uncertain for 30s, normally buy out to 10-year maturity. 3) Given its
rarity, the issue trades expensive on the curve; but roll is now -12 vs.
-13.5 bps in prior days. 4) This is one of biggest 30Y sales ever, at
least since 1988. 5) Other 2 refunding sales: 3s, 10s, still hold loss.