Steady Demand at 2 Year Treasury Notes Auctions Among Heavy Supply

U.S. long bond finished on its high while the 5-yr note and shorter tenors dipped from their intraday highs after today’s $51 billion 2-yr note sale met solid demand ahead of tomorrow’s $52 bln 5-yr note sale. Crude oil fell toward its October low (81.50) while the U.S. Dollar Index climbed 0.7% to 106.27, reclaiming yesterday’s loss. The high yield (5.055%) matched the when-issued yield. The bid-to-cover ratio (2.64x) was a bit shy of average (2.74%) while indirect takedown (62.0%) was just above average (61.9%). The desk gave a C rating on the auction.

This week brings some new supply. There is today’s $51 billion, 2-yr note auction, a $52 billion, 5-yr note offering tomorrow, and a $37 billion 7-yr note auction on Thursday.

  • 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 with 15.00% versus normal around 18.8%

Auction Highlights

  • Duration: 2 Years
  • Amount:  $45 billion
  • High-yield 5.055% (When-Issued: 5.055%)
  • WI level at the time of the auction 5.055%)
  • With no tail
  • Bid to cover 2.64X versus 12-month average of 2.74X
  • Directs 20.3% versus 12-month average of 20.7%
  • Indirects 62.0% versus 12-month average of 61.9%
  • Dealers 17.7% versus 12-month average of 17.4%

Auction grade: C

Yields after the auction.

  • 2-yr: +4 bps to 5.10%
  • 3-yr: +3 bps to 4.91%
  • 5-yr: +3 bps to 4.82%
  • 10-yr: UNCH at 4.84%
  • 30-yr: -3 bps to 4.96%

Yields Before the Auction.

  • 2-yr: +4 bps to 5.10%
  • 3-yr: +4 bps to 4.92%
  • 5-yr: +5 bps to 4.84%
  • 10-yr: +3 bps to 4.87%
  • 30-yr: +1 bp to 5.00%

Prior auction results:

  • High yield: 5.085%
  • Bid-to-cover: 2.73
  • Indirect bid: 65.0%
  • Direct bid: 21.0%

Average results of previous 12 auctions:

  • High yield: 4.489%
  • Bid-to-cover: 2.74
  • Indirect bid: 61.9%
  • Direct bid: 20.7%

Bond auctions week ahead:

New supply this week.

  • Monday: 13- and 26-week bills
  • Tuesday:  42-day cash management bills, $51 bln 2-yr Treasury note auction results at 13:00 ET
  • Wednesday: 17-week bills; 2-year floating rate notes, $52 bln 5-yr Treasury note auction results at 13:00 ET
  • Thursday: 4- and 8-week bills; $38 bln 7-yr Treasury note auction results at 13:00 ET
Bond Traders Weekly Outlook: Global Bond Rout Gathered Pace

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From The TradersCommunity US News Desk