As previewed earlier, this week we will see a massive amount of short-term bond issuance, with the amount of 2, 5 and 7Y auctions rising to the highest amount since 2013. And moments ago, we were off when the Treasury sold $35BN in 2Y bonds, $1BN more than last month, at a yield of 2.657%, above last month's 2.538% and the highest going back a decade to July 2008, and a 0.1 basis point tail to the 2.656% When Issued.

The internals were surprisingly strong, with the Bid to Cover rising to 2.92, above the 2.73 in June, and higher than the 6 auction average of 2.85. The indirect take down increased, with Indirects taking down 45.0%, above the 42.3% last month, and in line with the 6 month average of 45.4%. Direct bidders took down 14.29%, a drop from the 15.40% last month, leaving Dealers with 40.7% of the auction.

Overall, a solid auction despite the modest tail, even as rates on the short end continue rise significantly, putting further pressure on the yield curve, which sharp steepening over the past 2 days may now be over, and flattening is back on deck.