Auction Preview: US to sell USD 58bln of 3-year notes at 18:00BST/13:00EDT

Auction History Tail: (prev. -1.2bps, six-auction average -0.4bps) High Yield: (prev. 3.897%, six-auction average 3.633%) B/C: (prev. 2.68x, six-auction average 2.67x) Dealer: (prev. 13.3%, six-auction average 12.7%) Direct: (prev. 11.9%, six-auction average 23.4%) Indirect: (prev. 74.8%, six-auction average 63.9%) PrimerThe 3-year yield currently trades at 3.945%, above the prior 3.897% high yield and well above the six-auction average, which may help support appetite at today’s auction.Geopolitical uncertainty remains elevated amid the ongoing Middle East conflict, with front-end yields continuing to take direction from swings in energy prices. President Trump recently rejected Iran’s latest proposal and described the ceasefire as “very weak”, helping keep geopolitical risk premium elevated and oil prices firm.Meanwhile, the MOVE index — a measure of Treasury market volatility — has continued to ease from the peaks seen at the end of March, now trading around 67 versus roughly 82 at the time of the April offering. The decline in volatility could help improve participation at today’s auction.The May auction follows a very strong 3-year offering in April, although the breakdown was notable, with direct demand falling to the lowest level since April 2024 while indirect demand surged to the second-highest level on record. Today’s auction should provide a clearer test of whether higher outright yields and easing volatility are enough to draw real money accounts back into the front-end, or whether demand remains primarily driven by foreign buyers.