The week’s auctions started off with solid demand for the $40 billion 3-year note sale, with solid domestic and international demand. The sale drew a high yield of 4.635%, which tailed the when-issued yield by 0.6 basis points while the bid-to-cover ratio (2.73x) was above average. Ahead of the auction the Treasury complex retreated in immediate reaction to this morning’s hawkish testimony from Fed Chairman Powell. The response saw a further tightening in the 2s10s spread by another eleven basis points to -104 bps, a new record. The desk gave an A- rating on the auction. Equities trade at their lows with the S&P 500 down 1.2%.
Today’s $40 bln bid-to-cover ratio (2.73x) and indirect takedown (62.49%) were above average. The desk gave an A- rating on the auction.
- The domestic demand was above its twelve-month average indicative of stronger domestic demand
- International demand (indirect) was comfortably below the six-month average
Auction Highlights
- Duration: 3 Years
- Amount: $40 billion
- High yield 4.635%
- WI level 4.641%
- Tail versus -0.6 basis points versus six-month average of 0.3 basis points
- Bid to cover 2.73X times versus six-month average of 2.56X
- Dealers 16.84% versus 21.1% six-month average
- Directs 20.67% versus six-month average of 18.9%
- indirects 62.49% versus six-month average of 60.1%
Auction grade: A-
Yields after the auction
- 2-yr: +8 bps to 4.99%
- 3-yr: +6 bps to 4.69%
- 5-yr: +2 bps to 4.29%
- 10-yr: -3 bps to 3.96%
- 30-yr: -5 bps to 3.86
Prior auction results:
- High yield: 3.431%
- Bid-to-cover: 2.52
- Indirect bid: 58.8%
- Direct bid: 19.0%
Average results of previous 12 auctions:
- High yield: 3.431%
- Bid-to-cover: 2.52
- Indirect bid: 58.8%
- Direct bid: 19.0%
Live From the Pit
From The TradersCommunity US News Desk