The week’s auctions started off with solid demand for the $40 billion 3-year note sale which stopped 5s and shorter tenors from slipping to fresh lows, while 10s and 30s continued trimming their gains into the close. The short end saw buying in response to the completion of today’s $42 bln 3-yr Treasury note auction, which met solid demand ahead of tomorrow’s $38 bln 10-yr note sale. The sale drew a high yield of 4.398%, which stopped through the when-issued yield by 1.8 bps while the bid-to-cover ratio (2.90x) and indirect takedown (74%) were above average. The desk gave a B+ rating on the auction.
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 have been absorbed well.
Today’s $40 bln bid-to-cover ratio (2.90x) and indirect takedown (74%) were above average. The desk gave a B+ 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 twelve-month average
Auction Highlights
- Duration: 3 Years
- Amount: $40 billion
- High yield: 4.398%
- When-Issued: 4.416%
- Stopped through the when-issued yield by 1.8 bps
- Bid to cover 2.90X times versus 12-month average of 2.64X
- Dealers 10.80% versus 12-month average of 19.2%
- Directs 15.7% versus 12-month average of 19.0%
- Indirects 74.0% versus 12-month average of 62.6%
Auction grade: B+
Yields After the Auction
- 2-yr: -2 bps to 4.75%
- 3-yr: -3 bps to 4.42%
- 5-yr: -4 bps to 4.11%
- 10-yr: -5 bps to 4.03%
- 30-yr: -5 bps to 4.20%
Yields Before the Auction.
- 2-yr: -3 bps to 4.74%
- 3-yr: -4 bps to 4.41%
- 5-yr: -6 bps to 4.09%
- 10-yr: -8 bps to 4.00%
- 30-yr: -8 bps to 4.18%
Prior Auction Results:
- High yield: 4.534%
- Bid-to-cover: 2.88
- Indirect bid: 69.4%
- Direct bid: 19.8%
Average results of previous 12 auctions:
- High yield: 4.059%
- Bid-to-cover: 2.64
- Indirect bid: 62.6%
- Direct bid: 19.0%
- Directs a measure of domestic demand.
- Indirects a measure of international demand
- Dealers take the balance.
Live From the Pit
From The TradersCommunity US News Desk