Weak 10-year U.S. Treasury Bond Auction Ahead of CPI and FOMC

US Treasuries began the week with losses across the curve with intraday selling producing lows shortly after the completion of today’s $32 bln 10-yr note reopening, which met weak demand.  The 10-Year Bond Sale performed worse than expected ahead of tomorrow’s CPI number release. The auction garnered a D- rating across the Fixed Interest desk after the high yield tailed the when-issued yield by 3.4 bps. Notably the day’s earlier $40 bln 3-yr note sale found solid interest, the shorter date in line with the bond market risk profile.

November CPI is due to report tomorrow morning, followed by the latest FOMC Decision on Wednesday, and the November Retail Sales report on Thursday.

The bid to cover 2.31X vs. six-month average of 2.40X, indirect takedown 59.45 percent vs. the six-month average of 62.8%. The desk gave a D- rating on the auction.

Auction Highlights

  • Duration: 10 Years
  • Amount:  $32 billion
  • High yield: 3.625%
  • When-Issued level at the time of the auction 3.588%
  • Tail 3.7 basis points vs. six-month average of 1.8 basis points
  • Bid to cover 2.31X vs six-month average of 2.40X
  • DIrects (a measure of domestic demand) 18.7% vs 19.0%
  • Indirects (a measure of international demand) 59.45% vs six-month average of 62.8%
  • Dealers 21.86% vs the six-month average of 18.3%

Auction grade: D-

Yields after the auction

  • 2-yr: +5 bps to 4.39%
  • 3-yr: +7 bps to 4.17%
  • 5-yr: +5 bps to 3.80%
  • 10-yr: +5 bps to 3.62%
  • 30-yr: +3 bps to 3.58%

Average results of previous 12 auctions:

  • High yield: 2.739%
  • Bid-to-cover: 2.44
  • Indirect bid: 65.9%
  • Direct bid: 18.0%

Prior auction results:

  • High yield: 4.140%
  • Bid-to-cover: 2.23
  • Indirect bid: 57.5%
  • Direct bid: 18.1%
  • Directs a measure of domestic demand
  • Indirects a measure of international demand
  • Dealers take the balance

Live From the Pit

From The TradersCommunity US News Desk