The week’s auctions started off with solid domestic demand for the $40 billion 3-year note sale. U.S. Treasuries picked up off their lows after the completion. The sale drew a high yield of 4.202 with yields much higher than last month’s 3.695%. The auction had a small tail of 0.2 bps. The bid-to-cover ratio (2.70x) was comfortably above the prior 12-auction average (2.58x) while indirect takedown at 61.5% was well below last month’s 73.3% but above average (61.0%). The desk gave a C rating on the auction. Equities trade in the green with longer-dated Treasuries just above their lows seen in late morning trade while shorter tenors outperform with slight gains.
The U.S. Treasury is working to replenish its General Account with an estimated $1 trillion of Treasury issuance due to the debt ceiling impasse. Overall, the sales were absorbed well, $123 billion worth of bills was also sold today. Next up is an auction of $32 bln 10-yr note reopening at 13:00 ET.
Today’s $40 bln bid-to-cover ratio (2.70x) and indirect takedown (61.5%) were above average. The desk gave an C rating on the auction.
- The domestic demand was well below its twelve-month average indicative of stronger domestic demand
- International demand (indirect) was comfortably above the six-month average
Auction Highlights
- Duration: 3 Years
- Amount: $40 billion
- High yield: 4.202%
- When-Issued: 4.200%
- Tail 0.2 bps versus six-month average tail of 0.3 basis points
- Bid to cover 2.70X times versus 12-month average of 2.58X
- Dealers 16.80% versus 21.1% 12-month average of 19.9%
- Directs 21.7% versus 12-month average of 19.1%
- Indirects 61.5% versus 12-month average of 61.0%
Auction grade: C
Yields After The Auction
- 2-yr: -3 bps to 4.59%
- 3-yr: -2 bps to 4.24%
- 5-yr: UNCH at 3.92%
- 10-yr: +3 bps to 3.77%
- 30-yr: +3 bps to 3.92%
Yields Before the Auction.
- 2-yr: -2 bps to 4.60%
- 3-yr: -1 bp to 4.25%
- 5-yr: +2 bps to 3.94%
- 10-yr: +4 bps to 3.78%
- 30-yr: +4 bps to 3.93%
Prior Auction Results:
- High yield: 3.695%
- Bid-to-cover: 2.93
- Indirect bid: 73.3%
- Direct bid: 13.7%
Average results of previous 12 auctions:
- High yield: 3.833%
- Bid-to-cover: 2.58
- Indirect bid: 61.0%
- Direct bid: 19.1%
- Directs a measure of domestic demand
- Indirects a measure of international demand
- Dealers take the balance
Updated today’s 10 Year Reopening Results:
Live From the Pit
From The TradersCommunity US News Desk