U.S. Treasuries saw underperformance following the $46 billion 3-yr note auction, which saw the high-yield of 4.74% tail the when-issued yield of 4.723% by almost two basis points. Securities across the curve saw some leakage after the auction results. The 2.56 bid-to-cover ratio trailed the prior 12-auction average of 2.70. Wednesday will feature a $35 billion 10-yr note reopening, which will be followed by a $20 billion 30-yr bond reopening on Thursday. Longer-dated maturities are leading today’s gains. The 2s10s inversion has widened to 32 basis points from 27 basis points. The desk gave an F 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.
The bid to cover 2.56X vs. 12-month average of 2.70X, indirect takedown 56.0% versus 12-month average of 63.8%. The desk gave a F rating on the auction.
Auction Highlights
- Duration: 3 Years
- Amount: $44 billion
- High yield: 4.74%
- When-Issued level at the time of the auction 4.723%
- Tail 0.9 basis points versus six-month average of 1.9 basis points
- Bid to cover 2.56X vs 12-month average of 2.70X
- Directs 21.9% vs 12-month average of 18.8%
- Indirects 56.0% versus 12-month average of 63.8%
- Dealers 22.1% versus 12-month average of 17.5%
Auction grade: F
- Directs a measure of domestic demand
- Indirects a measure of international demand
- Dealers take the balance
Yields after the Auction.
- 2-yr: -7 bps to 4.99%
- 3-yr: -11 bps to 4.77%
- 5-yr: -12 bps to 4.62%
- 10-yr: -12 bps to 4.66%
- 30-yr: -11 bps to 4.83%
Yields Before the Auction.
- 2-yr: -12 bps to 4.94%
- 3-yr: -16 bps to 4.72%
- 5-yr: -17 bps to 4.59%
- 10-yr: -14 bps to 4.64%
- 30-yr: -11 bps to 4.83%
Average results of previous 12 auctions:
- High yield: 4.250%
- Bid-to-cover: 2.70
- Indirect bid: 63.8%
- Direct bid: 18.8%
Prior auction results:
- High yield: 4.660%
- Bid-to-cover: 2.75
- Indirect bid: 57.7%
- Direct bid: 22.1%
- 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