U.S. Treasuries of all tenors backpedaled from session highs that were reached around 9:00 ET. after the tamer than expected CPI report as the market positioned ahead of tomorrow’s FOMC meeting. The long bond gave back most of its post-CPI advance after the completion of today’s $18 bln 30-yr bond reopening, which met underwhelming demand. It was a day of severe price reversal; equities have given back the bulk of their gains with the S&P 500 narrowing its advance to 0.4% while the Nasdaq (+0.5%) remains ahead. The Fixed Interest desk rated it a D after yesterday’s D- on the 10-year auction.
The bid-to-cover ratio of 2.25x was below average 2.33x, indirect takedown was 61.6% vs 66.6% average. The desk gave an D rating on the auction. Today’s buying after the weaker than expected inflation report for November suggests the bond market is already looking past inflation-related headlines to an expected deceleration in growth also.
Auction Highlights
- Duration: 30 Years
- Amount: $18 billion
- High yield 3.513%
- WI level at time of auction 3.482%
- Tail -3.3 basis points
- Bid-Cover Ratio: 2.25X vs six-month average of 2.33X
- Direct Accepted: 23.1% vs six-month average of 17.6%
- Indirect Accepted: 61.6% vs. six-month average of 66.6
- Dealers 15.3% vs six-month average of 15.8%
Auction grade: D
Yields after the auction
- 2-yr: -20 bps to 4.19%
- 3-yr: -22 bps to 3.92%
- 5-yr: -16 bps to 3.65%
- 10-yr: -11 bps to 3.50%
- 30-yr: -6 bps to 3.51%
Prior auction results:
- High yield: 4.080%
- Bid-to-cover: 2.42
- Indirect bid: 69.9%
- Direct bid: 20.4%
Yields ahead of the auction
- 2-yr: -25 bps to 4.14%
3-yr: -25 bps to 4.14%
5-yr: -20 bps to 3.60%
10-yr: -17 bps to 3.44%
30-yr: -12 bps to 3.46%
Average results of previous 12 auctions:
- High yield: 3.068%
- Bid-to-cover: 2.39
- Indirect bid: 69.5%
- Direct bid: 17.6%
Live From the Pit
From The TradersCommunity US News Desk