Primer: US to sell USD 42bln of 10-year notes at 18:00GMT/13:00EST

US 10-YEAR NOTE AUCTION RECENT HISTORY: High Yield: (prev. 5.300%, six-auction avg. 4.734%) Tail: (prev. -1.7bps, six-auction avg. -0.6bps) Bid-to-Cover: (prev. 2.77x, six-auction avg. 2.60x) Dealers: (prev. 2.54%, six-auction avg. 7.45%) Directs: (prev. 17.12%, six-auction avg. 15.90%) Indirects: (prev. 80.34%, six-auction avg. 76.65%) What could support today's auction? Recent cheapening: The 10-year yield has risen notably following the hotter-than-expected US CPI report, providing a more attractive entry point for investors ahead of today's offering. Reduced event risk: The October CPI report is now in the rear-view mirror, removing a key source of near-term uncertainty that was present ahead of Monday's 3-year auction. However, the inflation surprise could still weigh on demand by reinforcing expectations for further Fed tightening. Lower Treasury volatility: The MOVE index has declined to around 86 from approximately 100 at the time of the October auction, suggesting reduced Treasury market volatility, which could encourage investors to take on duration exposure. Easing geopolitical uncertainty: Further reports suggesting progress in US/Iran negotiations have helped reduce geopolitical uncertainty, potentially supporting demand for Treasuries. What could weigh on today's auction? Lower outright yields: The 10-year yield currently trades around 5.00%, approximately 30bps below the previous auction's 5.300% high yield, reducing the outright yield attractiveness of the offering compared with last month. Inflation and Fed expectations: The hotter-than-expected October CPI report has reinforced expectations for further Fed tightening, potentially discouraging investors from adding duration exposure despite the recent cheapening. Money markets now assign a 10% probability of a 50bps move in December. Curve dynamics The 3s10s spread currently trades at 21.9bps, narrowing from 33.0bps at the time of the previous 10-year auction. This reduces the additional yield compensation available from extending into the 10-year sector from the front end, potentially weighing on the relative attractiveness of the offering. Meanwhile, the 10s30s spread has narrowed slightly to 36.9bps from 38.0bps, suggesting the 10-year has become marginally more attractive relative to the 30-year, although the difference is limited. Previous auction The previous USD 39bln 10-year Treasury auction was particularly strong, stopping through the WI by a sizeable 1.7bps at 5.300%, compared with the prior 1.5bp stop-through and the updated six-auction average stop-through of 0.6bps. The bid-to-cover ratio rose to 2.77x from 2.71x, comfortably above the 2.60x average. Indirect participation was particularly strong at 80.34%, above the 76.65% average, while dealers were left with just 2.54%, well below the 7.45% average, suggesting robust end-user demand. Direct participation was also slightly above average at 17.12% versus 15.90%.