The last time we saw a 10 Year auction with comparable confusing internals, it was in July, when in a bond issue that smashed virtually all record, the sold 10 year paper in what we then dubbed a "WTF auction." Today's 10 Year $21 billion reopening, while maybe not quite as stunning in all categories, and coming at a yield of only the third highest in history or 1.65%, certainly had enough drama in the internals to qualify for the designation of WTF 2.0. It wasn't the Bid to Cover either that made it remarkable, which at 2.95 was higher than November, but well below the TTM. What truly set aside this reopening was that the Directs, continuing on yesterday's surge, took down a massive 42.7% of the auction: only the second highest since the July 45.4%. The flipside of course is that Indirects were left holding 24.2%, or the lowest Indirect take down since April 2009. Why did this dramatic inversion happen? Why the collapse in Indirect bidder interest (only $6.6 billion in bids tendered for an allocation of $5.1 billion)? It is unclear, for now.
What is clear is that the category called as Indirects is showing progressively less interest in US paper, and Directs have to step up and so far they have. Is this merely a spike in buying ahead of the Fed, and thus a hope for a quick flip? Stay tuned - we will find out in January when the next 10 Year should finally confirm whether or not Directs are the new Indirects (and the new monetizing Fed is still the old monetizing Fed).