U.S. Treasuries pulled off lows as the bond market responded to today’s $12 billion 20-yr bond reopening, which met stellar demand. The sale drew a high yield of 4.010%, which stopped through the when-issued yield by 1.8 bps while the bid-to-cover ratio (2.87x) and indirect takedown (74.6%) were well above their respective 12-auction averages, reflecting continued strong appetite for U.S. government debt. Todays followed last weeks’ strong 3-, 10- and 30-year auctions with a flood of new supply in coming weeks and months as the Treasury works to replenish its General Account with an estimated $1 trillion of Treasury issuance as part of the latest debt-ceiling resolution. The desk gave an B+ rating on the 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.
Today’s $12 bln 20-yr bond stopped through the when-issued yield by a basis point. The desk gave a B+ rating on the auction.
- The domestic demand was below its 12-month average indicative of stronger domestic demand
- International demand (indirect) was above the 12-month average
- Primary dealers were left with just under 8% versus normal around 10.6%
Auction Highlights
- Duration: 20 Years
- Amount: $12 billion
- High yield 4.010%
- WI 4.028%
- Stopped Through +1.8 basis points vs. six-month average of -1.3 basis points
- Bid to cover 2.87 vs. 12-month average of 2.60X
- Directs 17.6% vs. 12-month average of 18.0%
- Indirects 74.6% vs 12-month average is 71.4%
- Dealers 7.8% vs 12 -month average of 10.6%
Auction grade: B+
Yields after the auction
- 2-yr: +1 bp to 4.71%
- 3-yr: +2 bps to 4.31%
- 5-yr: +2 bps to 3.98%
- 10-yr: +3 bps to 3.75%
- 30-yr: +2 bps to 3.84%
Prior auction results:
- High yield: 3.954%
- Bid-to-cover: 2.56
- Indirect bid: 70.6%
- Direct bid: 18.1%
Average results of previous 12 auctions:
- High yield: 3.829%
- Bid-to-cover: 2.60
- Indirect bid: 71.4%
- Direct bid: 18.0%
Live From the Pit
From The TradersCommunity US News Desk