Heading into today’s 10 Year Treasury auction, we knew it would be special no matter how it turned out: with $26 billion in notional for sale, it would be the highest amount of 10Y paper sold for this maturity. And with deficits only set to rise from here, it is safe to assume that many more such records will fall in the coming months.
What about the actual details of the auction?
Printing with a high yield of 2.960%, this was “on the screws” with the 2.960% When Issued, and while higher than the 2.859% in July’s auction, it was below the 2.965% from June’s auction. What is notable is that so far in 2018 there has not been a single auction that priced with a yield north of 3.00%.
The internals were solid, with the Bid to Cover of 2.55, slightly down from 2.57 in July but higher than the 6 auction average of 2.50. And while yesterday’s 3Y auction saw foreign bidders clearly spooked, today there was no such worries as Indirects took down 61.3%, down slightly from 65% last month, but in line with the 61.8% six auction average. Directs took down 11.3%, slightly above the auction average, which left 27.5% for Dealers, slightly below the trendline here.
Bottom line: this was a solid auction, even for a “record” issuance, and heading into tomorrow’s 30Y auction, there should be no major surprises despite yesterday’s poorly digested 3Y auction.
