It had been an ugly day for bonds all day, with 10Y yields rising to day’s highs moments ago, rising as much as 1.427%, and as such it was hardly a surprise that today’s Treasury sale of $24 billion in 3 year paper was anything but impressive. In fact, it was downright ugly.
The high yield of 0.765%, while a steep drop from last month’s 0.93%, tailed the When Issued 0.761% by 0.4 bps.
The internals were also rather ugly: the bid to cover of 2.69 was the lowest since July 2009. Indirect bidders took down $10.7 billion of the final deal, or 44.7% of the offered, which was a big drop from recent highs, including the 61.5% in May and 48.1% in July. It was also below the 50.3 12 month average. On the flipside, Directs ended up with 15.8% of the auction, or the highest since December of 2015, meaning Dealers were left with 39.4% of the auction, just shy of last month’s 40.8%
Overall, a poor auction, and one which has led to some additional selling pressure across the curve.
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