Primer: US to sell USD 58bln of 3-year notes at 18:00GMT/13:00EDT

• High Yield: (prev. 4.932%, six-auction avg. 4.369%)
• Tail: (prev. -0.2bps, six-auction avg. -0.1bps)
• Bid-to-Cover: (prev. 2.62x, six-auction avg. 2.64x)
• Dealers: (prev. 10.7%, six-auction avg. 12.1%)
• Directs: (prev. 31.7%, six-auction avg. 25.2%)
• Indirects: (prev. 57.6%, six-auction avg. 62.7%)

Easing geopolitical uncertainty: Lower oil prices and comments from US President Trump over the weekend that he is unlikely to resume military action against Iran while negotiations continue have helped ease geopolitical uncertainty. However, oil prices remain near levels seen at the previous 3-year auction, despite retreating substantially from their recent highs. WTI crude traded around USD 89/bbl at the time of the prior auction, compared with USD 88/bbl at the time of writing, although well below the USD 105/bbl highs seen towards the end of October.

Lower Treasury volatility: The MOVE index has retreated to around 88 from 109 at the time of the previous auction, suggesting reduced Treasury market volatility, which could encourage investors to take on duration exposure.

Haven demand: The recent rout in AI-related stocks has weighed on global risk sentiment and encouraged demand for haven assets, potentially supporting Treasuries. However, Friday's and Monday's rebound in technology stocks may have tempered some of this demand.

Lower yields: The 3-year yield has declined to around 4.61% from the previous auction's 4.93% high yield, a drop of approximately 32bps, reducing the outright yield attractiveness of the offering.

Upcoming US CPI: The October CPI report is due Tuesday and could materially shift Fed expectations, particularly following Friday's stronger-than-expected US jobs report. Given the 3-year sector's sensitivity to the expected Fed policy path, investors may prefer to remain on the sidelines until the inflation data is released.

With the 3-, 10- and 30-year Treasury auctions scheduled for this week, relative yield attractiveness will also be in focus. The 3s10s spread currently stands at 26bps, narrowing from 35.7bps at the time of the previous 3-year auction, while the 3s30s spread has narrowed to 65bps from 71.4bps. The flattening of the curve indicates that the additional yield compensation available from extending into longer maturities has diminished, potentially improving the relative attractiveness of the 3-year sector versus the 10- and 30-year sectors.

The previous 3-year auction was average overall. The modest 0.2bp stop-through and relatively low dealer allocation suggested the offering was comfortably absorbed, while strong direct participation was encouraging. However, the slightly below-average bid-to-cover ratio and weaker indirect participation prevented the auction from being characterised as particularly strong, despite the substantial yield pickup from the preceding month's offering.