10-year U.S. Treasury Bond Auction Lackluster Demand Ahead of Tomorrow’s CPI

The US Treasury 10-Year Bond Sale performed worse than expected ahead of tomorrow’s CPI number release. The auction garnered a C- rating across the fixed Interest desk with weak demand from the international market and a tail 1.6 bps. The reopening follows yesterday’s disappointing 3-yr note sale and it sets the stage for an $18 bln 30-yr bond reopening tomorrow. Equities are treading water after today’s hot PPI. Today’s backtracking say Treasuries slip from their intraday highs, returning the long bond into negative territory, yield up +1 bps at 3.91%.

The bid to cover 2.34X vs. six-month average of 2.47X, indirect takedown 56.79 percent vs. the six-month average of 66.1%. The desk gave a C- rating on the auction.

Auction Highlights

  • Duration: 10 Years
  • Amount:  $32 billion
  • High yield: 3.93%
  • When-Issued level at the time of the auction 3.914%
  • Tail 1.6 basis points vs six-month average of 1.6 basis points
  • bid to cover 2.34X vs 2.47X average
  • Dealers 19.7% vs six-month average of 16.3%
  • Directs 23.51% vs. six-month average of 17.3%
  • Indirects 56.79% vs. six-month average of 66.1%

Auction grade: C

Yields after the auction

  • 2-yr: +2 bps to 4.32%
  • 3-yr: +1 bp to 4.35%
  • 5-yr: -3 bps to 4.14%
  • 10-yr: -1 bp to 3.93%
  • 30-yr: +1 bp to 3.91%

Average results of previous 12 auctions: High yield: 2.319%

  • High yield: 2.319% 
  • Bid-to-cover: 2.47
  • Indirect bid: 68.2%
  • Direct bid: 17.2%

Prior auction results:

  • High yield: 3.330%
  • Bid-to-cover: 2.37
  • Indirect bid: 62.3%
  • Direct bid: 17.9%
  • Directs a measure of domestic demand
  • Indirects a measure of international demand
  • Dealers take the balance

Live From the Pit

From The TradersCommunity US News Desk