Steady 3-Year Treasury Bond Auction with High yield 3.810% Right on When Issued Pricing

The week’s auctions started off with steady demand for the $40 billion 3-year note sale. U.S. Treasuries faced some light pressure after the sale drew a high yield of vs 3.810% WI, meaning no tail or stop through. The bid-to-cover ratio (2.59x) was a touch above average (2.54x), as was indirect takedown (61.3% vs 59.4%). The desk gave a C+ rating on the auction.  Equities trade near flat lines with the S&P 500 (+0.2%) holding a modest gain while the Nasdaq (-0.3%) lags ahead of CPI and PPI over the next few days.

The around 80 bps move from current and prior levels stems from the prior auction came after the Treasury complex retreated in immediate reaction to that morning’s hawkish testimony from Fed Chairman Powell. The response that day saw a further tightening in the 2s10s spread by another eleven basis points to -104 bps, a new record and sold at 4.635%. From there we had the regional bank runs.

Today’s $40 bln bid-to-cover ratio (2.59x) and indirect takedown (61.3%) were above average.  The desk gave a C+ 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 3.810%
  • WI level 3.810%
  • Tail 0 basis points versus six-month average of 0.3 basis points
  • Bid to cover 2.59X times versus 12-month average of 2.54X
  • Dealers 17.70% versus 21.1% 12-month average of 21.4%
  • Directs 21.0% versus 12-month average of 19.2%
  • Indirects 61.3% versus 12-month average of 59.4%

Auction grade: C+

Yields after the auction

  • 2-yr: +6 bps to 4.06%
  • 3-yr: +6 bps to 3.84%
  • 5-yr: +5 bps to 3.57%
  • 10-yr: +4 bps to 3.45%
  • 30-yr: +2 bps to 3.65%

Prior auction results:

  • High yield: 4.635%
  • Bid-to-cover: 2.73
  • Indirect bid: 62.5%
  • Direct bid: 20.7%

Average results of previous 12 auctions:

  • High yield: 3.670%
  • Bid-to-cover: 2.54
  • Indirect bid: 59.4%
  • Direct bid: 19.2%

Live From the Pit

From The TradersCommunity US News Desk