Heavy International Demand in 10-year U.S. Treasury Note Auction Boosts Bonds

US Treasuries rallied Wednesday with most tenors picking up after the completion of today’s $35 bln 10-yr note reopening, which met excellent demand.  The auction drew a high yield of 3.613% stopped through the when-issued yield by three basis points while the bid-to-cover ratio (2.66x) and indirect takedown (79.45%) were well above the 12-auction average. Today’s auction followed yesterday’s very weak 3-yr note sale, which had much to do with Fed Chair Powell’s Speech at the same time. Another factor was the U.S. Dollar Index traded down about -0.1% to $103.36. The desk gave an A rating on the auction.

The bid to cover 2.66x vs. six-month average of 2.39x, indirect takedown 79.45% percent vs. the six-month average of 62.9%. led the desk to give an A rating on the auction.

Auction Highlights

  • Duration: 10 Years
  • Amount:  $35 billion
  • High yield: 3.613%
  • WI level at the time of the auction 3.643%
  • Tail -3 BPS. Six-month average of -0.5 basis points
  • Bid to cover 2.66X vs six-month average of 2.39X
  • Directs 15.19% versus 18.6% six-month average.
  • Indirects 79.45% vs six-month average of 62.9%
  • Primary Dealers 5.36% vs 18.5% six-month average

Auction grade: A

Yields after the auction.

  • 2-yr: -1 bp to 4.45%
  • 3-yr: -3 bps to 4.09%
  • 5-yr: -5 bps to 3.80%
  • 10-yr: -4 bps to 3.63%
  • 30-yr: -1 bp to 3.69%

Average results of previous 12 auctions:

  • High yield: 3.069%
  • Bid-to-cover: 2.43
  • Indirect bid: 65.2%
  • Direct bid: 18.1%

Prior auction results:

  • High yield: 3.575%
  • Bid-to-cover: 2.53
  • Indirect bid: 67.0%
  • Direct bid: 17.9%
  • Directs a measure of domestic demand
  • Indirects a measure of international demand
  • Dealers take the balance

Source: US Treasury

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