U.S. Treasuries trade just below session highs, with the 2-yr note continuing to underperform and still in the red with shorter tenors now little changed for the day. The market rebounded off opening lows into the completed $42 bln 2-yr note sale, which met strong demand. The auction drew a high yield of 4.300%, which stopped through the when-issued yield by 1.5 bps while the bid-to-cover ratio (2.90x) and indirect takedown (61.2%) were comfortably above average, best since June 2009. The desk gave a B+ rating on the auction.
Equities have added to their losses with the S&P 500 now down 0.5% with nerves over the debt ceiling and the stronger services PMI saying rates higher for longer.
Today’s $42 bln bid-to-cover ratio (2.90x) and indirect takedown (68.2%) were above average. The desk gave a B+ rating on the auction.
- The domestic demand was below its six-month average indicative of softer domestic demand.
- International demand (indirect) was above the six-month average.
- Primary dealers were left with16.2% versus normal around 18.8%
Auction Highlights
- Duration: 2 Years
- Amount: $42 billion
- High-yield 4.300%
- WI level at the time of the auction 4.315%
- Stopped through by 1.5 bps versus a 6-month average of -0.1 basis points.
- Bid to cover 2.90X vs 12-month average of 2.61X
- Directs 15.6% vs 12-month average of 21.8%
- Indirects 68.2% vs 12-month average of 58.3%
- Dealers 16.2% vs 6-month average of 18.8%
Auction grade: B+
Yields after the auction.
- 2-yr: +3 bps to 4.37%
- 3-yr: +2 bps to 4.02%
- 5-yr: +1 bp to 3.78%
- 10-yr: +1 bp to 3.73%
- 30-yr: UNCH at 3.97%
Prior auction results:
- High yield: 3.969%
- Bid-to-cover: 2.68
- Indirect bid: 61.2%
- Direct bid: 19.9%
Average results of previous 12 auctions:
- High yield: 3.857%
- Bid-to-cover: 2.61
- Indirect bid: 58.3%
- Direct bid: 21.8%
Live From the Pit
From The TradersCommunity US News Desk