U.S. Treasuries completed this week’s spectacular note auctions with the $35 bln 7-yr note high yield of 3.517%, which stopped through the when-issued yield by 2.1 bps. The bid-to-cover ratio (2.69x) well above average (2.48x) while indirect takedown (international buyers) at 77.1%, the highest level since May. This followed yesterday’s 5-year sale which also stopped through strongly. We are seeing a continuation of foreign buyers of US Treasuries stepping up purchases after JGB volatility and uncertainty in Europe with Russia. The fixed interest desk rated the auction an A.
Equities remain positive with the S&P 500 +0.5%) holding a 1.6% gain for the week at this time buoyed by strong Tesla earnings and better than expected Q4 GDP and New Home Sales.
- The domestic demand was below its six-month average indicative of weaker domestic demand
- International demand (indirect) was comfortably above the six-month average
- Primary dealers were left with 6.1% versus normal around 11.7%
Auction Highlights
- Duration: 7 Years
- Amount: $35 billion
- High yield of 3.517%
- WI 3.538%
- Stopped through when-issued yield by 2.1 bps vs. six-month average of -0.4 basis points.
- Bid to cover 2.69X vs. 2.48X
- Dealers 6.1% vs. six-month average of 11.7%
- Directs 16.8% vs. six-month average of 19.6%
- Indirects 77.1% vs. six-month average of 68.7%
Auction grade: A
Yields after the auction
- 2-yr: +2 bps to 4.37%
- 3-yr: +1 bp to 4.18%
- 5-yr: -5 bps to 3.93%
- 10-yr: -6 bps to 3.83%
- 30-yr: -5 bps to 3.92%
Prior auction results:
- High yield: 3.921%
- Bid-to-cover: 2.45
- Indirect bid: 68.1%
- Direct bid: 16.2%
Average results of previous 12 auctions:
- High yield: 3.061%
- Bid-to-cover: 2.48
- Indirect bid: 66.2%
- Direct bid: 20.5%
Live From the Pit
From The TradersCommunity US News Desk