After yesterday’s disappointing 3Y auction, which was rocked by the rollercoaster swing in markets on a day-old AFP report, moments ago the US Treasury just sold $34BN in 10Y paper (in a reopening of Cusip CDY4) which came just as the FT was sending out fake news that the UAE had reached out to OPEC+ to urge a production boost, which sparked a flash crash in oil and unleashed a new volatility shockwave across assets.
And, just like yesterday, today’s auction left a lot to be desired, with the bond stopping at 1.92%, tailing 0.3bps to the 1.917% When Issued, and just above last month’s 1.904% high yield.This was the highest yield on a 10Y auction since July 2019.
The Bid to Cover predictably dipped from 2.68 to 2.47, the lowest since December, and below the 6-auction average of 2.53.
The internals were also weak, with Indirects taking down 68.2%, down from last month’s solid 77.6%, and below the 70.8% recent average. And with Directs taking down 18.0%, Dealers were left with 13.7% of the auction which however now that QE is over, they will be unable to flip back to the Fed in a few days.
Bottom line: the second disappointing, tailing auction in a row, although in light of the market fireworks that hit just as the auction was being completed, it’s not much of a surprise.