Solid Demand at 2 Year Treasury Auction with Higher International Demand

U.S. Treasuries hover near their morning lows as Treasury auctions flood 2024 with another week of heavy supply. The 2-year $60 billion two-year notes auction kicked off this weeks’ auctions and met strong demand. A high yield of 4.365% right at the when-issued yield of 4.365%. Notably six of the last eight 2-year auctions stopped through by an average of 0.7 basis points. The bid-to-cover ratio (2.57x vs 2.73x average) was a bit below average while indirect takedown (65.3% vs 62.9% average) was well ahead the prior 12-auction average. The desk gave a B rating to the auction.

The S&P 500 trades right above its flat line. The US dollar index hit a six-week high above 103.7 ahead of the auction with higher yields.

Auction Highlights

  • Duration: 2 Years
  • Amount:  $60 billion
  • High-yield 4.365%
  • WI level at the time of the auction  4.365%
  • No stopped through or tail of the when-issued yield
  • Bid to cover 2.57X versus 12-month average of 2.73X
  • Directs 19.9% versus 12-month average of 20.4%
  • Indirects 65.3% versus 12-month average of 62.9%
  • Dealers 14.8% versus 12-month average of 14.7%

Auction grade: B

Yields after the auction.

  • 2-yr: +3 bps to 4.41%
  • 3-yr: +3 bps to 4.17%
  • 5-yr: +5 bp to 4.07%
  • 10-yr: +6 bps to 4.15%
  • 30-yr: +7 bps to 4.39%

Yields Before the Auction.

  • 2-yr: +3 bps to 4.41%
  • 3-yr: +3 bps to 4.17%
  • 5-yr: +3 bps to 4.05%
  • 10-yr: +4 bps to 4.14%
  • 30-yr: +5 bps to 4.37%

Prior auction results:

  • High yield: 4.314%
  • Bid-to-cover: 2.68
  • Indirect bid: 61.9%
  • Direct bid: 19.5%

Average results of previous 12 auctions:

  • High yield: 4.574%
  • Bid-to-cover: 2.73
  • Indirect bid: 62.9%
  • Direct bid: 20.4%

Bond auctions week ahead:

This week will bring some new supply.

  • Monday: $75 billion 13-week bills, $68 billion 26-week bills,
  • Tuesday: $75 billion 42-day cash management bills, 46 billion 52-week bills, $60 bln 2-yr Treasury note auction results at 13:00 ET
  • Wednesday: $56 billion 17-week bills; $61 bln 5-yr Treasury note auction results at 13:00 ET
  • Thursday: $80 billion 4- and 8-week bills; $41 bln 7-yr Treasury note auction results at 13:00 ET

Live From the Pit

From The TradersCommunity US News Desk