Mediocre 10Y Auction Sees Lowest Dealer Takedown Since 2017
Ninety minutes after today’s first auction, when the Treasury sold $58 billion in a somewhat subpar sale, moments ago the Treasury followed up the 2nd coupon auction of the day when it sold $38 billion in benchmark 10Y paper in today’s 9-year 10-month reopening which also could have gone better.
The high yield of 1.371% – which stopped through the 1.374% when issued courtesy of a substantial concession throughout the day – was well below last month’s 1.497% and was in fact the lowest high yield for the tenor going back to February when it priced at 1.155%. However, the Fed’s hawkish pivot which spooked the bond market with traders fearing about the plunge in r* has pushed yields sharply lower in recent days and sure enough today’s 10Y auction yield was the lowest in 5 months.
Besides the dip in the high yield, the auction also saw the bid to cover slide to 2.39 from last month’s 2.58 and the lowest since April’s 2.36.
The internals were somewhat stronger, with Indirects taking down 63.5%, below last month’s 65.0% if above the six-auction average of 61.3. And with Directs taking down 17.5%, Dealers were left holding 19.0% of the auction, the lowest since March 2017 when Dealers ended up holding 18.6%.
Overall, a forgettable auction if somewhat better than the earlier, tailing 3Y auction…
… and one which helped pushed 10Y yields slightly lower from session highs, trading at 1.3662% last down from just north of 1.37% prior to the auction.