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Blockbuster Demand For 2Y Trasury Auction Sends Yield To 8 Year Low

Courtesy of ZeroHedge View original post here.

Just hours after the BOJ joined the global "nuclear" central bank response, when it announced the launch of unlimited QE, demand for today's 2Y Treasury auction was not coincidentally off the charts, with the yield tumbling further to just 0.229% down from 0.390% last month, stopping through the When Issued by 1.3bps – the biggest since May 2016 – and the lowest since July 2012.

The blistering demand also manifested itself in a surge in the Bid to Cover, which soared to 3.102 from 2.362, the highest since Jan 2018 and far above the 2.51 six auction average.

The internals were quite impressive as well, with the Direct takedown doubling from 8.55% last month to 17.80%, in line with the recent average of 17.2%, and with Indirects taking down a whopping 55.81%, higher than last month's 55.20%, and above the 49.9% six auction average, it left Dealers holdings just 26.3% of the auction, the lowest since last November.

And with a truncated issuance schedule ahead of this week's FOMC announcement, we will get the 5Y auction in just over two hours (and the 7Y tomorrow). It will be interesting to see if we get the same blistering demand there as we just witnessed in the 2Y paper.

Overall, tremendous demand for 2Y paper which is getting precariously close to yields where the Bill complex is trading, and suggesting that sooner or later, the Fed will have to launch some form of Yield Curve Control as Zoltan Pozsar predicted to prevent Bill yields from rising above coupons.


 


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