10-year Bond Auction Sees Strong International Takedown

U.S. Treasuries came off afternoon lows in reaction to strong demand at the $42 billion 10-yr Treasury note auction. The sale followed yesterday’s strong 3-yr note offering. The sale drew a high yield of 4.093%, which stopped through the when-issued yield by 1.2 bps while the bid-to-cover ratio (2.56x vs 2.49x average) and indirect takedown (71.0% vs 66.7%) were comfortably above their respective prior 12-auction averages. However, the 5-yr note and longer tenors continue with small losses while shorter tenors remain in positive territory, continuing today’s outperformance in the curve. The U.S. Dollar Index was down 0.2% to 104.05. The desk gave an A rating on the auction.

The U.S. Treasury is working to replenish its General Account with an estimated $1 trillion of Treasury issuance due to the debt ceiling impasse.

Auction Highlights

  • Duration: 10 Years
  • Amount:  $42 billion
  • High yield: 4.093%
  • When-Issued level at the time of the auction: 4.105%
  • Stopped through the when-issued yield by 1.2 bps
  • Bid to cover 2.56X vs 12-month average of 2.49X
  • Directs 16.1% vs 12-month average of 18.9%
  • Indirects 71.0% versus 12-month average of 66.7%
  • Dealers 12.9% versus 12-month average of 14.4%

Auction grade: A

  • Directs a measure of domestic demand
  • Indirects a measure of international demand
  • Dealers take the balance

Yields after the Auction.

  • 2-yr: -1 bp to 4.39%
  • 3-yr: -3 bps to 4.16%
  • 5-yr: UNCH at 4.04%
  • 10-yr: +1 bp to 4.10%
  • 30-yr: +2 bps to 4.32%

Yields Before the Auction.

  • 2-yr: -1 bp to 4.39%
  • 3-yr: -3 bps to 4.16%
  • 5-yr: -1 bp to 4.04%
  • 10-yr: +1 bp to 4.10%
  • 30-yr: +2 bps to 4.31%

Average results of previous 12 auctions:

  • High yield: 3.991%
  • Bid-to-cover: 2.49
  • Indirect bid: 66.7%
  • Direct bid: 18.9%

Prior auction results:

  • High yield: 4.024%
  • Bid-to-cover: 2.56
  • Indirect bid: 66.1%
  • Direct bid: 18.7%
  • Directs a measure of domestic demand
  • Indirects a measure of international demand
  • Dealers take the balance

Bond auctions week ahead:

This week will bring some new supply.

  • Monday: $79 billion 13-week bills, $70 billion 26-week bills
  • Tuesday: $80 billion 42-day cash management bills, $54 bln 3-yr Treasury note auction results at 13:00 ET
  • Wednesday: $56 billion 17-week bills, $42 bln 10-yr Treasury note auction results at 13:00 ET;
  • Thursday: $80 billion 4- and 8-week bills, $25 bln 30-yr Treasury bond auction results at 13:00 ET

Live From the Pit

From The TradersCommunity US News Desk