Bond markets have been rocked in the past week as Central Banks globally ratcheted up rates. The benchmark 10-year Gilt was ravaged on Friday and today after the Bank of England released a statement. U.S. Treasuries haven’t been left out. U.S. Treasuries sit on their lows after widening their initial losses after today’s $43 bln 2-yr note auction met weak demand. The high yield of 4.290% stopped through the when-issued yield by 1.6 bps. The desk gave a D- rating on the auction. The S&P 500 and Nasdaq 100 are near the low for the day.
In just one month the US government is paying nearly a full percentage point, almost $1 billion in extra interest over the life of these bonds.
Today’s $43 bln bid-to-cover ratio (2.51x) and indirect takedown (53.0%) were below average. The desk gave a D- rating on the auction.
- The domestic demand was below its twelve-month average indicative of softer domestic demand
- International demand (indirect) was also comfortably below the six-month average
- Primary dealers were left with 21.9 % versus normal around 22.2%
Auction Highlights
- Duration: 2 Years
- Amount: $43 billion
- High yield 4.290%
- WI 4.274%
- Tail -1.3 BPs.
- bid to cover 2.51x vs 12-month average of 2.56X
- Dealers 21.9% vs. 12-month average 22.2%
- Direct 24.8% vs. 12-month average of 19.6%
- Indirects 53.3% vs.12-month average of 58.2%
Auction grade: D-
Yields after the auction
- 2-yr: +14 bps to 4.35%
- 3-yr: +15 bps to 4.38%
- 5-yr: +19 bps to 4.18%
- 10-yr: +20 bps to 3.90%
- 30-yr: +10 bps to 3.71%
Prior auction results:
- High yield: 3.307%
- Bid-to-cover: 2.49
- Indirect bid: 59.7%
- Direct bid: 17.3%
Average results of previous 12 auctions:
- High yield: 1.800%
- Bid-to-cover: 2.56
- Indirect bid: 58.2%
- Direct bid: 19.6%
Live From the Pit
From The TradersCommunity US News Desk