U.S. Treasuries trade just below session highs with the belly of the curve remaining slightly ahead after after the completion of today’s $42 bln 2-yr note auction. The sale drew a high yield of 3.969% (When-Issued: 3.966%) which tailed the when-issued yield by 0.3 bps while bid-to-cover ratio (2.68x) and indirect takedown (61.2%) were above average. The desk gave a C rating on the auction. We have seen buying from weak equities markets. The S&P 500 down 1.0% while the Nasdaq (-1.2%) remains weaker still.
Today’s auction will be followed by a $43 bln 5-yr note offering tomorrow and a $35 bln 7-yr note sale on Wednesday.
Today’s $42 bln bid-to-cover ratio (2.68x) and indirect takedown (61.2%) were above average. The desk gave a C 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 with18.93 % versus normal around 19.7%
Auction Highlights
- Duration: 2 Years
- Amount: $42 billion
- High-yield 3.969%
- WI level at the time of the auction 3.966%
- Tail 0.3 basis points versus a 6 month average of 0.0 basis points
- Bid to cover 2.68X vs 6 month average of 2.66X
- Directs 19.87% versus 6 month average of 22.0%
- Indirects 61.2% versus a 6 month average of 58.3%
- Dealers 18.93% versus a 6 month average of 19.7%
Auction grade: C
Yields after the auction.
- 2-yr: -13 bps to 4.00%
- 3-yr: -15 bps to 3.68%
- 5-yr: -13 bps to 3.47%
- 10-yr: -11 bps to 3.41%
- 30-yr: -8 bps to 3.65%
Prior auction results:
- High yield: 3.954%
- Bid-to-cover: 2.44
- Indirect bid: 52.8%
- Direct bid: 24.2%
Average results of previous 12 auctions:
- High yield: 3.742%
- Bid-to-cover: 2.61
- Indirect bid: 58.7%
- Direct bid: 21.9%
Live From the Pit
From The TradersCommunity US News Desk