Weak U.S. 10-year Treasury Bond Auction Graded C Minus with High Yield of 2.943% and 1.4 Basis Point Tail 

The US Treasury 10-Year Bond Sale performed worse than expected following the hot April CPI number released earlier in the day, garnering a D+ rating across the Fixed Interest desk with strong demand from the international market. However, the tail was -1.4 basis points with WI level at time of the auction 2.929% and the high yield of 2.943% at the auction. Soft demand after yesterday’s $50 billion 3-yr note sale. The post-auction selling was heaviest in the long bond as shorter tenors remain near their best levels of the day.

The bid-to-cover ratio of 2.43x was below average 2.52x, as was indirect takedown 64.3% vs 65.5% average. The desk gave an F rating on the auction.

Auction Highlights

  • Duration: 10 Years
  • Amount:  $36 billion
  • High yield 2.720% (prev 1.920%) (When-Issued: 2.690%)
  • WI level at time of auction 2.690%
  • Tail -3.0 basis points
  • Bid to cover 2.49 versus six-month average of 2.48X
  • Directs 18.21% vs six-month average of 16.6%
  • Indirects 70.3% vs six-month average of 69.2%
  • Dealers 11.49% vs six-month average of 14.2%.

Auction grade: C-

Yields prior the auction

  • 2-yr: +7 bps to 2.70%
  • 3-yr: +6 bps to 2.89%
  • 5-yr: +6 bps to 2.97%
  • 10-yr: +2 bps to 3.02%
  • 30-yr: +3 bps to 3.16%

Average results of previous 12 auctions: High yield: 2.005%

  • High yield: 1.670%
  • Bid-to-cover: 2.51
  • Indirect bid: 68.9%
  • Direct bid: 16.7%
  • 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