10 Year Auction Reopens At Highest Yield Since October 2011, Lowest Bid To Cover Since August
Following yesterday's ugly 3 Year auction, some were worried the bond market weakness could spill over to today's benchmark 10 Year reopening of $21 billion in paper. It prices just through the When Issued of 2.210%, or at 2.209%, a little better than expected, although the highest yield since October of 2011. So while the demand on the surface was sufficient, the Bid to Cover, which dropped to only 2.53, below last month's 2.70, well below the TTM average of 2.92, and the lowest since August of 2012 when the BTC came at 2.49. Nonetheless, the downward slope in the BTC curve in both the 3 and 10 Year auctions is quite visible. In terms of takedown, there was a surprise as the Indirects took down a whopping 51.7%, the highest since December of 2011 when they were left with 61.9%. And while Dealers ended up with just 36.6% it was the Directs that had the smallest allocation, or 11.7%, since September of last year. Perhaps Dealers are now masking as Indirect. Either way, the good news is that with the reopening, dealers should have some additional collateral for a while, or at least until the Fed monetizes it. Look for this CUSIP - VB3 (On The Run) to remain on the POMO exclusion lists for white a while.