The week’s auctions started off with a soft $40 billion 3-year note sale, which broke the streak of stellar note and bond offerings with international demand dropping right off. The sale drew a high yield of 4.073%, which tailed the when-issued yield by four basis points while the bid-to-cover ratio (2.33x) and indirect takedown (59.1%) were below average. We were of the opinion that the previous strong auctions had much ado with new year buying. The desk gave a D rating on the auction.
The auction was prior to a speech from Fed Chairman where he said more rate hikes will be needed, but also focused on disinflation, saying that the process has barely started and has a long way to go.
Today’s $40 bln bid-to-cover ratio (2.33x) and indirect takedown (59.1%) were below average. The desk gave a D rating on the auction.
- The domestic demand was above its twelve-month average indicative of stronger domestic demand
- International demand (indirect) was comfortably below the six-month average
Auction Highlights
- Duration: 3 Years
- Amount: $40 billion
- High yield 4.073%
- WI level 4.033%
- Tail -0.4 basis points vs. six-month average of 0.3 basis points
- Bid to cover 2.33X vs 2.59X six-month average.
- Directs 21.1% versus 18.2% over the last six months
- Indirects 59.1% versus 60.70% six month average
- Primary dealers 19.9% versus 21.0% six month average
Auction grade: D
Yields after the auction
- 2-yr: -2 bps to 4.44%
- 3-yr: -4 bps to 4.09%
- 5-yr: -3 bps to 3.79%
- 10-yr: UNCH at 3.63%
- 30-yr: +2 bps to 3.69%
Prior auction results:
- High yield: 3.977%
- Bid-to-cover: 2.84
- Indirect bid: 69.5%
- Direct bid: 13.2%
Average results of previous 12 auctions:
- High yield: 3.224%
- Bid-to-cover: 2.53
- Indirect bid: 59.6%
- Direct bid: 18.1%
Live From the Pit
From The TradersCommunity US News Desk