Treasury Auctions 2-year Notes at 5.085%, Part of $131 Billion Fresh Bond Supply This Week

U.S. Treasuries were lower after a slow daylong reversal off opening highs. Today’s selling lifted yields on 10s and 30s to fresh highs for the year while yields on shorter tenors are not far from doing the same. The U.S. Treasury sold $48 bln in 2-yr notes to strong demand ahead of tomorrow’s $49 bln 5-yr note auction. The sale drew a high yield of 5.085% with no tail, last was at -0.4bps, while the bid-to-cover ratio (2.73x) and indirect takedown (65.0%) were above average. The desk gave an A rating on the auction. This week brings some new supply. There is today’s $45 billion, 2-yr note auction, a $49 billion, 5-yr note offering tomorrow, and a $37 billion 7-yr note auction on Thursday.

Today’s $45 bln bid-to-cover ratio (2.73x) and indirect takedown (65.0%) were above average.  The desk gave an B+ rating on the auction.

  • The domestic demand was below its six-month average indicative of softer domestic demand
  • International demand (indirect) was above the six-month average
  • Primary dealers were left with 15.00% versus normal around 18.8%

Auction Highlights

  • Duration: 2 Years
  • Amount:  $45 billion
  • High-yield 5.024%
  • WI level at the time of the auction 5.028%
  • With no tail
  • Bid to cover 2.73X versus 12-month average of 2.72X
  • Directs 21.0% versus 12-month average of 21.0%
  • Indirects 65.0% versus 12-month average of 60.9%
  • Dealers 14.0% versus 12-month average of 18.1%

Auction grade: B+

Yields after the auction.

  • 2-yr: +2 bps to 5.14%
  • 3-yr: +1 bp to 4.83%
  • 5-yr: +1 bp to 4.63%
  • 10-yr: +2 bps to 4.56%
  • 30-yr: +4 bps to 4.70%

Yields Before the Auction.

  • 2-yr: +2 bps to 5.14%
  • 3-yr: +1 bp to 4.83%
  • 5-yr: -2 bps to 4.60%
  • 10-yr: -2 bps to 4.53%
  • 30-yr: UNCH at 4.66%

Prior auction results:

  • High yield: 5.024%
  • Bid-to-cover: 2.94
  • Indirect bid: 65.0%
  • Direct bid: 20.0%

Average results of previous 12 auctions:

  • High yield: 4.432%
  • Bid-to-cover: 2.72
  • Indirect bid: 60.9%
  • Direct bid: 21.0%

Bond auctions week ahead:

Next week will bring some new supply.

  • Monday: 13- and 26-week bills
  • Tuesday: $48 bln 2-yr Treasury note auction results at 13:00 ET
  • Wednesday: 17-week bills 2-Year $49 bln 5-yr Treasury note auction results at 13:00 ET
  • Thursday: 4- and 8-week bills; $37 bln 7-yr Treasury note auction results at 13:00 ET

Live From the Pit

From The TradersCommunity US News Desk