$13 Billion 30 Year Auction Closes Strongly At 4.08%, 2.89 Bid To Cover, As Investors Shun Inflation Threat
The last coupon auction for the week was a success, pricing at 4.08%, the lowest yield since October 2009 when the auction priced at just 4.009%. Bid to cover was also the strongest in many months, matching the March interest and lower then just the September 2009 record of 2.92. Primary Dealers took down 46.4%, higher than the past 3 auctions but in line with the long-term average. Surprisingly Indirect bidders showed the greatest appetite for the 30 year part of the curve taking down 37.4%, the highest since the 40.7% in January. Direct Bidders continue declining, and at a 16.1% take down, was the lowest allocation since January's 4.9%. Based on this very strong auction, investors seem to put far more faith in a deflation than inflation scenario.