The final auction of the week confirms that something is seriously amiss with the market. On one hand, there remains a substantial (short covering) bid to risk assets; on the other buyers just can’t get enough of safe paper issued by the government: we saw it in the strong 3Y, the stronger 10Y and now we just got a blistering 30Y which not only priced 2 bps through the When Issued, not only saw a jump in the Bid to Cover from 2.327 to 2.402, the highest since December, but also had an Indirect takedown of 65.1%, the second highest on record and just shy of the 66.0% in September of 2015.
Directs were left holding 10.8% of the auction and Dealers had 24.1% of the final allotment, the smallest on record.
The blistering response to this issuance has once again pushed the entire treasury complex lower because while domestic buyers are focused on chasing stocks, foreign central banks seemingly can’t get enough of US Treasury paper, leading to this week’s strong auction results.
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