U.S. 10-year Bond Auction Auctioned at Highest Yield at Auction Since 2007 Ahead of CPI

US 10-yr Treasuries were auctioned off at the highest yield at auction since 2007, this was as expected given it was priced in the when-issued market price beforehand. The completion of today’s $35 billion 10-yr note auction, being met with solid demand. The high yield (4.289%) matched the when-issued yield of 4.289% however the bid-to-cover ratio (2.52x) was well above average (2.42x), and indirect takedown was also above average (66.3% vs 64.8% average). Notably yesterday the $44 bln 3-yr note sale found similar interest, the shorter date in line with the bond market risk profile. The desk gave a C+ 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.

The bid to cover 2.56X vs. 12-month average of 2.42X, indirect takedown 72.2% versus 12-month average of 64.8%. The desk gave a B- rating on the auction.

Auction Highlights

  • Duration: 10 Years
  • Amount:  $35 billion
  • High yield: 4.289%
  • When-Issued level at the time of the auction 4.289%
  • No Tail i.e., 0.09 basis points versus six-month average of 1.4 basis points
  • Bid to cover 2.52X vs 12-month average of 2.42X
  • Directs 19.9% vs 12-month average of 19.1%
  • Indirects 66.3% versus 12-month average of 64.8%
  • Dealers 13.8% versus 12-month average of 16.1%

Auction grade: C+

  • Directs a measure of domestic demand
  • Indirects a measure of international demand
  • Dealers take the balance

Yields after the Auction.

  • 2-yr: +3 bps to 5.01%
  • 3-yr: UNCH at 4.70%
  • 5-yr: +1 bp to 4.43%
  • 10-yr: UNCH at 4.29%
  • 30-yr: -1 bp to 4.37%
Softer Demand at 3-year Bond Auction in Another Week of Heavy Supply

Yields Before the Auction.

  • 2-yr: +2 bps to 5.01%
  • 3-yr: -1 bp to 4.69%
  • 5-yr: +1 bp to 4.42%
  • 10-yr: UNCH at 4.29%
  • 30-yr: UNCH at 4.37%

Average results of previous 12 auctions:

  • High yield: 3.729%
  • Bid-to-cover: 2.42
  • Indirect bid: 64.8%
  • Direct bid: 19.1%

Prior auction results:

  • High yield: 3.999%
  • Bid-to-cover: 2.56
  • Indirect bid: 72.2%
  • Direct bid: 18.3%
  • Directs a measure of domestic demand
  • Indirects a measure of international demand
  • Dealers take the balance
Bond Traders Weekly Outlook: Global Bond Market Liquidity Deleveraging

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