The U.S. Treasury will auction off $35 billion of 10 year notes at the top of the hour.
The six-month averages of the major components shows:
- Bid to cover 2.41X.
- Tail +1.4 basis points.
- Directs (a measure of domestic demand) 18.3%
- Indirects (a measure of international demand) 64.8%
- Dealers (they are left with the rest) 16.9%.
The last auction came in at a high yield of 3.455% with a tail of 2.0 basis points and a bid to cover less than the average at 2.36X. The 10 year yield is currently at 3.452% near the level from last month.
Earlier today Dai Ichi insurance and Nippon Life insurance said that they were to cut U.S. Treasury holdings in favor of JGBs in FY 2023, as they become wary of high FX hedging costs, and the risk of JPY appreciation (lower USDJPY). I wonder if such a shift will be reflected in things like the Bid to cover, or even lead to higher tails and less indirect bidding? Of course there is still huge international demand, and they are not stopping but cutting their demand. The international demand has been saving the day in most treasury auctions.
Yesterday the 3 year note saw a tail of -2.8 basis points, thanks to record demand from international buyers.
Tomorrow the U.S. Treasury will auction off 30 year bonds to complete the refunding this week.