One month after a catastrophic 3Y auction priced with the biggest tail in the past decade and dismal metrics, today’s sale of $40BN in 3Y paper was actually quite impressive.
Pricing at a high yield of 4.635%, a new high for the cycle and above both last month’s 4.073% and the previous cycle high of November ’22 at 4.605%, the auction stopped through the When Issued by 0.6bps – unremarkable, until one remembers that last month we saw a gigantic 4bps tail. Then again, last month’s auction followed the blowout payrolls report which repriced all risk assets; of course we have yet to see the February jobs number due Friday.
The bid to cover of 2.727 was also a solid improvement to last month’s 2.333, and aside from January’s 2.839, this was the highest BtC going back all the way to 2018.
The internals were also impressive with Indirects taking 62.5% of the auction, above last month’s 59.1% and also above the six-auction average of 69.5%. And with Directs taking down 20.7%, also above the recent average of 18.9%, Dealers were awarded a record low 16.8%.
With the auction coming in stronger than expected, it had little impact on the secondary market although although the post-Powell gust of profit- (and loss-) taking means that 10Y yields actually rose after the solid auction, with the 10Y last seen around 3.96%.
