10Y Yield Rebounds From Session Low After Ugly, Tailing Treasury Auction
With 10Y yields sliding all day, and painfully squeezing near-record duration shorts, as the market aggressively prices in the Fed’s upcoming policy error, today’s 10Y auction provided a brief respite for duration bears as the sale of $39BN in ten year paper was plain and simple ugly.
One day after a solid 3Y auction, the high yield on today’s benchmark auction stopped at 1.444%, well below October’s 1.584%, however it also tailed the When Issued by 1.2bps, which was the first tail since April.
The bid to cover was also ugly, dropping from 2.58 in October to 2.35, the worst print of 2021 (the lowest since Dec 2020), and well below th six-auction average of 2.54.
The internals, like yesterday, were a bit better with Indirects taking 71.0%, virtually unchanged from yesterday’s 71.1%, and with Directs taking down 13.8%, the lowest since August, Dealers were left holding 15.2%, or the most since July.
Overall, a mediocre auction, and one which helped yields bounce some 3bps from session lows of 1.41% hit just before the auction.