Primer: US to sell USD 22bln of 30-year bonds at 18:00BST/13:00EDT

Auction History Tail: (prev. 0.4bps, six-auction average 0.3bps) High Yield: (prev. 5.216%, six-auction average 5.015%) B/C: (prev. 2.39x, six-auction average 2.38x) Dealer: (prev. 11.5%, six-auction average 11.5%) Direct: (prev. 21.6%, six-auction average 22.1%) Indirect: (prev. 66.8%, six-auction average 66.4%) Primer The 30-year yield trades around 5.400%, its highest level since 2007, with yields now above the levels seen when Treasury announced it would at least double the size of its long-end buyback operations. The historically high outright yield should support demand at today's auction, similar to how the higher yield and additional cheapening helped provide an attractive setup for Wednesday's strong 10-year offering. Treasury market volatility also remains at a similar level to the previous 30-year auction. However, significant event risk remains, with Friday's pivotal CPI report set to further shape Fed rate expectations, while Treasury's first enlarged USD 6bln 10-20yr buyback operation is due after today's auction. There has been further cheapening ahead of the auction on Thursday, driven in part by rallying oil prices. WTI briefly reclaimed USD 100/bbl, with the latest upside occurring amid an escalating situation around the Bab al-Mandeb Strait. Reports throughout the morning suggested that the Houthis are close to gaining complete control of the Strait after taking control of the city of Al Mukha. Reports also suggested they are taking control of Zaqar Island, Mayun Island and the Al-Omair military and strategic base, which overlooks the Strait. Regarding Fed policy, money markets currently lean towards a 25bp hike in September, assigning it around a 70% probability versus 30% for an unchanged rate. Pricing has been volatile in recent weeks: Chair Warsh's hawkish Jackson Hole speech, which placed greater emphasis on inflation, initially boosted hike expectations before Governor Waller's more dovish remarks brought pricing back towards a coin toss, with his September view heavily dependent on the upcoming inflation data. Last Friday's strong jobs report subsequently saw hawkish bets rebuild, while the recent surge in oil prices has added to inflation concerns. With the Fed providing little forward guidance and stressing data dependence, incoming economic releases have taken on greater importance for near-term policy expectations. The previous 30-year bond auction was soft. The US Treasury sold USD 25bln of 30-year bonds with a 0.4bp tail, below-average bid-to-cover and above-average dealer allocation, all pointing to weaker demand despite the considerably higher outright yield on offer. The sharp drop in indirect participation from July's exceptionally strong level was partly offset by a sizeable recovery in direct demand, although neither bidder category exceeded its recent average. The result suggested that the backup in long-end yields was not enough to generate particularly strong demand for duration at the previous offering. Overall, the historically elevated outright yield and further cheapening seen ahead of today's auction should provide a supportive backdrop for demand. However, appetite for duration could be tempered by heightened geopolitical and inflation uncertainty, particularly with Friday's pivotal CPI report still to come, while Treasury's first enlarged long-end buyback operation later today provides an additional source of event risk.