If it was the Treasury's intent to make auctioning of Treasury paper increasingly more fraught with risk, it has succeeded. Moments ago, in the second auction of the week and month, another $24 billion were added to the gross US debt, when the Treasury sold 10 year paper at a yield of 2.620%, pricing through the When Issued yield of 2.623% So far so good. However, as was shown last week, the trouble is in the internals. Recall that as Zero hedge first demonstrated in January and as the TBAC reconfirmed in their refunding presentation, the Bid to Covers have been declining across the curve.
It should perhaps come as no surprise then that the just completed 10 Year auction was completed at the lowest Bid To Cover, or 2.44, going all the way back to March 2009. This is well below the TTM average of 2.79, and below July's 2.57.
The other data was roughly in line: Dealers took down 38.5%, Indirects a substantial 46.3%, which was above the TTM average of 42.07% but below June's 51.7%, while Directs were left with 15.2%.
So how much more coordinated forcing out of the auction process will the Treasury take before something "changes" substantially and demand is left all up to the Dealers, who in turn can't wait to flip it back to the Fed? We may learn soon.