The US treasury auctioned off $54 billion of two-year notes:
- High-yield 4.887%
- WI at the time of auction 4.876%
- Tail: 1.1 basis points versus 6-auction average of -0.4 basis points.
- Bid-to-Cover Ratio: 2.54X versus 6-auction average of 2.79x.
- Dealers: 18.76% versus 6-auction average of 15.6%.
- Directs: 23.9% versus 6 average of 19.2%.
- Indirects: 57.4% versus 6 -auction average of 65.2%.
Auction grade:D+
The 2 year note auction was met with poor international demand. The domestic demand was actually stronger than expectations, but overall, the bid to cover was less than the 6-month average. The dealers are saddled with more than the 6-month average, and a tail of 1.1 basis points was needed to sell the issue. That compares to a 6 month average of -0.4 basis points. So overall it was a loser of an auction.
One issue might be the amount of supply coming to the market today. In addition to auctioning to your notes, the U.S. Treasury sold $73 billion a 6-month bills, and will sell $55 billion of 5-year notes at 1 PM ET.. Tomorrow the treasury auctioned off 7 year notes.
Although the auction was not very good, yields remain negative on the day:
- 2 year yield 4.918% -4.1 basis points
- 5 year yield 4.454% -4.8 basis points
- 10 year yield 4.435% -4.9 basis points
- 30 year yield 4.579% -3.8 basis points
