U.S. Treasuries completed this week’s note auctions with an underwhelming $35 bln 7-yr note sale. Treasuries trade at lows, the 10-yr yield is now just ten basis points below its high from July 7 (4.094%), the 5-yr yield remains 27 bps below its high from the first week of July. The sale drew a high yield of 4.087%, which tailed the when-issued yield by 1.3 bps while the bid-to-cover ratio (2.48x) was below the 12-auction average. Indirect takedown (69.8%), however, was a touch better than average. The desk gave an D rating on the auction. Equities sold off after the bond auction.
Tuesday treasuries completed a $43 bln 5-yr note auction which met tepid demand. Monday, we saw a $42 bln 2-yr note A- rated auction.
- The domestic demand was below its 12-month average indicative of weaker domestic demand
- International demand (indirect) was above the 12-month average.
- Primary dealers were left with 14.3% versus normal around 12.6%
- The desk gave an D rating on the auction.
Auction Highlights
- Duration: 7 Years
- Amount: $35 billion
- High-yield 4.087%
- WI level at the time of the auction 4.074%
- Tail 1.3 basis points vs six-month average of +0.9 basis points
- Bid to cover 2.48X v 12-month average of 2.51X
- Directs 15.9% v 12-month average of 19.0%
- Indirect 69.8% v 12-month average of over 68.3%
- Dealers 14.3% v 12-month average of 12.6%
Auction grade: D
Yields after the auction.
- 2-yr: +11 bps to 4.94%
- 3-yr: +11 bps to 4.57%
- 5-yr: +15 bps to 4.23%
- 10-yr: +14 bps to 3.99%
- 30-yr: +10 bps to 4.03%
Yields before the auction.
- 2-yr: +9 bps to 4.92%
- 3-yr: +10 bps to 4.56%
- 5-yr: +10 bps to 4.18%
- 10-yr: +8 bps to 3.93%
- 30-yr: +5 bps to 3.98%
Prior auction results:
- High yield: 3.839%
- Bid-to-cover: 2.65
- Indirect bid: 75.3%
- Direct bid: 16.6%
Average results of previous 12 auctions:
- High yield: 3.669%
- Bid-to-cover: 2.52
- Indirect bid: 68.3%
- Direct bid: 19.0%
Live From the Pit
From The TradersCommunity US News Desk