US Treasuries longer tenors turned negative after today’s weak $32 bln 10-yr note reopening which bled into post-auction selling. This sent all tenors to lows. shortly after the completion of today’s $32 bln 10-yr note reopening, which met weak demand with a large tail of the 2.7 basis points versus the WI level. Domestic demand nevertheless was higher than the six-month average at nearly 20% versus 18.5%. Fed Chairman Powell continued his testimony on Capitol Hill with rate hike expectations now showing a 77.9% implied likelihood of a 50-bps rate increase in two weeks, up from 69.8% yesterday. The auction garnered a D rating across. Notably yesterday’s $40 bln 3-yr note sale found solid interest, the shorter date in line with the bond market risk profile.
The bid to cover 2.35X vs. six-month average of 2.41X, indirect takedown 62.29 percent vs. the six-month average of 63.8%. The desk gave a D rating on the auction.
Auction Highlights
- Duration: 10 Years
- Amount: $32 billion
- High yield: 3.985%
- When-Issued level at the time of the auction 3.958%
- Tail 2.7 bps versus a six-month average of 1.3 basis point
- Bid to cover 2.35X versus a six month average of 2.41X
- Directs 19.98% versus a six month average of 18.5%
- Indirects 62.29% versus segment average of 63.8
- Dealers 17.73% versus six month average of 17.7%
Auction grade: D-
Yields after the auction
- 2-yr: +5 bps to 5.06%
- 3-yr: +6 bps to 4.73%
- 5-yr: +3 bps to 4.35%
- 10-yr: +2 bps to 3.99%
- 30-yr: +1 bp to 3.90%
Average results of previous 12 auctions:
- High yield: 3.212%
- Bid-to-cover: 2.43
- Indirect bid: 65.4%
- Direct bid: 18.1%
Prior auction results:
- High yield: 3.613%
- Bid-to-cover: 2.66
- Indirect bid:79.5%
- Direct bid: 15.2%
- 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