After two soggy coupon auctions earlier this week, which saw both the 3Y and 10Y sales tail modestly with subpar internals, moments ago the US Treasury sold $20BN in a 30 year paper (technically a 29-year 11 month reopening of CUSIP TD0), in what can only be described as a stellar auction.
The high yield of 2.375% was modestly higher than last month’s 2.34% and was the highest since May 2021. It was supposed to be wider because the When Issued was trading at 2.399%, resulting in a stop through of 2.4bps, the highest since July 2020. In short: solid.
The bid to cover rose from 2.302 to 2.458, the highest since Sept 2021.
The internals however were remarkable, with Indirects being awarded a whopping 71.52%, up from 67.95% last month and the 2nd highest on record, with just July 2020 higher.
And with Directs taking down 16.4%, or in line with recent average, this left Dealers holding just 12.1% the lowest on record, which since QE is now over, we doubt they minded too much as they can no longer turn around and flip the paper back to the Fed.
Overall, a stellar 30Y auction which will help sooth the market’s nerves amid today’s widespread rates selloff.
As a result of this stellar auction, the 30Y yield which was trading near session highs of 2.40% just as the 10Y traded north of 2.00% – dropped by about 4bps in kneejerk response, suggesting that no matter how scared about inflation, US paper will always find foreigners who deem it the world’s safe haven.
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