Strong 2 Year Auction Punctuated By Highest Bid To Cover In Over A Year
In last month's 2 Year bond auction we highlighted that the end of the declining Bids to Cover trend has arrived for good, after the 3.54 BTC priced at the second highest since February. Today's just concluded 2 Year slammed the door shut on any fears that there may be declining broad bid side demand, after the Bid to Cover of 3.767 printed at nearly the same level as January's 3.675, but well higher, making it the highest BTC since last November's 4.07. The market demand at the time of auction confirmed this, with the When Issued trading at 0.352% at 1 PM, only to see the final yield on the $30 billion auction cross at a very strong 0.345%. Finally, the internals were just as strong, with Direct bidders taking down 30.24%, well above the November 27.3% and the TTM average of 23.5%, while Indirects took a slightly softer 21.55%, leaving Dealers with their usual fare of just around half, or 48.21% to be precise. Bottom line: if there was some concern in the recent 3 Year auction, the complete lack of market jitteryness today showed that the market is certainly not worried about any Fed rate hikes until after 2015.
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