International Buyers Soak Up 2-year Treasury Bonds as 2/10 Inversion Breaks 100 Bps

U.S. Treasuries trade above intraday lows with all tenors slim gains after the $42 billion 2-yr note sale met excellent demand. The sale drew a high yield of 4.670%, which stopped through the when-issued yield by 0.8 bps, while the bid-to-cover ratio (2.86x) and indirect takedown (68.5%) were comfortably above average. The 2-Year Treasury yield and the 10-Year Treasury yield curve inversion continued to deepen on Monday beyond 100 basis points, the largest since late 1981. With the uncertainty from Russia over the weekend and recession worries from last week equities trade a bit above their lows with the S&P 500 -0.2%) and Nasdaq -0.8%. The desk gave an A- rating on the auction.

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 (2.86x) and indirect takedown (68.5%) were above average.  The desk gave an A- 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 4.670%
  • WI level at the time of the auction 4.678%
  • Stopped through the when-issued yield by 0.8 bps
  • Bid to cover 2.86X versus 12-month average of 2.63X
  • Directs 18.2% versus 12-month average of 21.3%
  • Indirects 68.5% versus 12-month average of 58.8%
  • Dealers 13.3% versus 12-month average of 19.8%

Auction grade: A-

Yields after the auction.

  • 2-yr: -1 bp to 4.74%
  • 3-yr: -3 bps to 4.30%
  • 5-yr: -3 bps to 3.96%
  • 10-yr: -2 bps to 3.72%
  • 30-yr: UNCH at 3.82%

Prior auction results:

  • High yield: 4.300%
  • Bid-to-cover: 2.90
  • Indirect bid: 68.2%
  • Direct bid: 15.6%

Average results of previous 12 auctions:

  • High yield: 4.006%
  • Bid-to-cover: 2.63
  • Indirect bid: 58.8%
  • Direct bid: 21.3%

Live From the Pit

From The TradersCommunity US News Desk