Yesterday’s 2 Year auction was surprisingly poor because, among other things, it was the first tailing auction since 2014. Moments ago the US Treasury sold $34 billion in another lackluster auction which saw the high yield print at 1.41%, tailing 0.2 bps through the When Issued.
The Bid to Cover was 2.41, modestly better than last month’s 2.38, if in line with the 6 month average.
The internals were modestly better, with Indirects taking down 63.4%, 10 bps higher than a month ago, while Directs took down 6.8%, leaving 29.8% for the Dealers, a rather conventional distribution.
To be sure, the weakness was not unexpected: not only was the OTR not trading special in repo this morning suggesting little short overhang, but with the Fed announcement in just two days, we doubt many were eager to put down capital in an auction that may see substantial whipsawing in just over 48 hours.
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