Following the early weakness in the Treasury complex, many dealers predicted that today’s 2 Year auction may tail the When Issued at pricing, and that is what happened, albeit by the smallest possible amount: today’s 2 Year auction closed at 0.842%, stopping through the When Issued 0.841% by the smallest possible increment of 0.1bps.
The internals were nothing to write home about. The Bid to Cover was 2.643, modestly higher than last month’s 2.578, if still below the 6 month average of 2.89.
Indirects walked away with 46.7% of the auction, fractionally less than the 47.1% from a month ago, while Directs ended up with 14.51% of the auction, leading to a Dealer take down of 38.36%, the highest since December of 2015.
Then again, in a week in whch the Fed is due to announce its decision, even if nobody realistically expects Yellen to surprise markets with some sudden hawkish shift, a lackluster 2Y was perhaps to be expected as few would be willing to take a big risk ahead of such an important event.
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