Treasury Auction Recap
Zero Hedge is starting a new commentary piece, which analyzes the immediate market impact of any most recent Treasury auction. As expected our initial focus will be on today's 10 Year Auction. We expect the tomorrow's $12 billion 30 Year to be markedly more interesting.
Positives –The $20 billion 10 Year issue was well accepted, highlighted by a 2.9bp tail compared to when this bond was first issued in August. The bid-to-cover was up modestly, and was above average, yet the most marked highlight was that indirect bidders took down the most they have in over 3 years. Zero Hedge has still to see an unambiguous definition of the adjusted "indirect" term that is not created by conflicted sources of data or distribution.
Negatives – Subsequent to the auction, the market not only did not recapture this morning’s yield concession, but sold off further. The negative tail is beneficial, but not surprising given the concession going into the auction. $42 million was allocated into SOMA at this reopening. SOMA holdings rolling off this week are light, constraining the Fed in buying at auction.