U.S. Treasuries of all tenors surged higher on Thursday in reaction to a cooler than expected October CPI report. The long bond climbed to a fresh high after the completion of today’s US Treasury 30-Year $21 billion bond auction, which met much stronger demand than yesterday’s 10-yr note sale. The sale drew a high yield of 4.080%, which stopped the when-issued yield by 3.3 bps, while the bid-to-cover ratio (2.42x) and indirect takedown (69.9%) were above average. This week’s action widened the 2s10s spread by three basis points to -48 bps. The Fixed Interest desk rated it a C+ after yesterday’s F on the 10-year auction. The bond market will be closed in observance of Veterans Day tomorrow.
The bid-to-cover ratio of 2.42x was above average 2.33x, indirect takedown was 69.9% vs 66.6% average. The desk gave an A rating on the auction. Today’s buying after the weaker than expected inflation report for October suggests the bond market is already looking past inflation-related headlines to an expected deceleration in growth also.
Auction Highlights
- Duration: 30 Years
- Amount: $21 billion
- High yield 4.080%
- WI level at time of auction 4.113%
- Tail -3.3 basis points
- Bid-Cover Ratio: 2.42X vs six-month average of 2.33X
- Direct Accepted: 20.4% vs six-month average of 17.6%
- Indirect Accepted: 69.9% vs. six-month average of 66.6
- Dealers 9.7% vs six-month average of 15.8%
Auction grade: A
Yields after the auction
- 2-yr: -34 bps to 4.30%
- 3-yr: -33 bps to 4.19%
- 5-yr: -34 bps to 3.94%
- 10-yr: -31 bps to 3.84%
- 30-yr: -23 bps to 4.09%
Prior auction results:
- High yield: 3.930%
- Bid-to-cover: 2.39
- Indirect bid: 69.1%
- Direct bid: 18.7%
Yields ahead of the auction
- 2-yr: -29 bps to 4.35%
- 3-yr: -28 bps to 4.24%
- 5-yr: -29 bps to 4.00%
- 10-yr: -27 bps to 3.88%
- 30-yr: -20 bps to 4.12%
Average results of previous 12 auctions:
- High yield: 2.886%
- Bid-to-cover: 2.37
- Indirect bid: 68.7%
- Direct bid: 17.4%
Live From the Pit
From The TradersCommunity US News Desk