U.S. Treasuries curve continues to diverge, shorter-dated Treasuries near their lowest levels of the day while the long bond outperforms, trading just below highs. The 30-yr bond is holding highs after the completion of today’s $12 bln 20-yr bond reopening, which met decent demand but nothing spectacular. The sale drew a high yield of 4.036%, which tailed the when-issued yield by a tenth of a basis point. However, the bid-to-cover ratio (2.68x) was above average (2.62x) while indirect takedown (68.8%) was shy of average (72.0%). Equities have backtracked from their starting highs with the S&P 500 narrowing its gain to 0.2% while the Nasdaq (-0.1%) is now down slightly. The desk gave a C- rating on the auction.
Today’s $12 bln 20-yr bond tailed the when-issued yield by a tenth of a basis point. The desk gave a C- rating on the auction. Domestic demand was strong. International demand was weak. Bid the cover was near the average.
- The domestic demand was above its 12-month average indicative of stronger domestic demand.
- International demand (indirect) was below the 12-month average
- Primary dealers were left with just under 10% versus normal around 10.3%
- Duration: 20 Years
- Amount: $12 billion
- High yield 4.036%
- WI 4.035%
- Tailed the when-issued yield by a tenth of a basis point.
- Bid to cover2.68 vs. 12-month average of 2.62X
- Directs 21.7% vs. 12-month average of 17.7%
- Indirects 68.8% vs 12-month average is 72.0%
- Dealers 9.5% vs 12 -month average of 10.3%
Auction grade: C-
Yields after the auction.
- 2-yr: +1 bp to 4.77%
- 3-yr: +1 bp to 4.36%
- 5-yr: UNCH at 4.00%
- 10-yr: -3 bps to 3.76%
- 30-yr: -4 bps to 3.86%
Prior auction results:
- High yield: 4.010%
- Bid-to-cover: 2.87X
- Indirect bid: 74.6%
- Direct bid: 17.6%
At the prior auction equities sold off with Fed Chairman Powell testimony before the House Financial Services Committee. In his prepared remarks, Powell said that “there is still a long way to go” in reducing inflation and that policymakers expect more rate hikes this year The main indices trade above their lows with the S&P 500 down 0.5% while the Nasdaq down -1.1% underperforms.
Average results of previous 12 auctions:
- High yield: 3.873%
- Bid-to-cover: 2.62
- Indirect bid: 72.0%
- Direct bid: 17.7%
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