Strong International Demand at 3-Year Treasury Bond Auction

US Treasuries saw some buying interest after the completion of a robust $40 bln 3-year note sale. The auction drew a high yield of 3.977%, which stopped through the when-issued yield by 2.3 bps. The bid-to-cover ratio (2.84x) and indirect takedown (69.5%) were well above average. The strong results point to new year buying and limited concern ahead of Thursday’s release of the CPI report for December. The desk gave a B rating on the auction. The S&P 500 and Nasdaq 100 were near the high for the day around the auction results. Treasuries remained just above their lows into the close.

Today’s $40 bln bid-to-cover ratio (2.84x) and indirect takedown (69.5%) were above average.  The desk gave a B rating on the auction.

  • The domestic demand was below its twelve-month average indicative of softer domestic demand
  • International demand (indirect) was comfortably above the six-month average

Auction Highlights

  • Duration: 3 Years
  • Amount:  $40 billion
  • High yield 3.977%
  • WI level 4.000%
  • Tail -2.3 basis points vs. six-month average of 0.2 basis points
  • Bid to cover 2.84X versus six-month average of 2.52X
  • Directs 13.2% versus a six-month average of 19.3%
  • Indirect 69.5% versus six-month average of 59.2%
  • Primary dealers 17.3% versus six-month average of 21.5%

Auction grade: B

Yields after the auction

  • 2-yr: +6 bps to 4.26%
  • 3-yr: +8 bps to 4.00%
  • 5-yr: +8 bps to 3.73%
  • 10-yr: +10 bps to 3.62%
  • 30-yr: +11 bps to 3.76%

Prior auction results:

  • High yield: 4.093%
  • Bid-to-cover: 2.55
  • Indirect bid: 61.7%
  • Direct bid: 20.4%

Average results of previous 12 auctions:

  • High yield: 2.996%
  • Bid-to-cover: 2.50
  • Indirect bid: 59.0%
  • Direct bid: 18.3%

Live From the Pit

From The TradersCommunity US News Desk