U.S. Treasuries sit on their lows after the recent completion of a $43 bln 5-yr note sale, which met strong demand, as the high yield (3.500%) stopped through the when-issued yield by 0.6 bps while the bid-to-cover ratio (2.54x) and indirect takedown (69.1%) were above average. Equities have been selling off since midday highs. Treasuries issues in the belly see the 2-yr note into negative territory, erasing opening gains. The desk gave a B- rating on the auction. Today’s sale followed yesterdays $42 bln 2-yr note C rated auction. Tomorrow sees a $35 bln 7-yr note sale.
Today’s $43 bln bid-to-cover ratio (2.54x) and indirect takedown (69.1%) were above average. The desk gave a B- rating on the auction.
- The domestic demand was under its 12-month average indicative of domestic demand lower on the curve.
- International demand (indirect) was comfortably above 12-month average.
Auction Highlights
- Duration: 5 Years
- Amount: $43 billion
- High yield 3.50%
- WI level at the time of the option 3.506%
- Stopped through 0.6% basis points versus the 6 month average of -0.6 basis points
- Bid to cover 2.54X vs 6 month average of 2.49X
- Directs (a measure of domestic demand) 17.3% versus 6 month average of 17.6%
- Indirects (a measure of international demand) 69.1% versus 6 month average of 68.8%
Auction grade: B–
Yields after the auction.
- 2-yr: +3 bps to 3.98%
- 3-yr: +11 bps to 3.74%
- 5-yr: +7 bps to 3.52%
- 10-yr: +5 bps to 3.45%
- 30-yr: +5 bps to 3.70%
Prior auction results:
- High yield: 3.665%
- Bid-to-cover: 2.48
- Indirect bid: 68.6%
- Direct bid: 18.2%
Average results of previous 12 auctions:
- High yield: 3.546%
- Bid-to-cover: 2.42
- Indirect bid: 65.3%
- Direct bid: 18.2%
Live From the Pit
From The TradersCommunity US News Desk