Strong 10 Year Auction Sees Lower Yield Despite Lowest Bid To Cover Since August

Tyler Durden's picture

In the aftermath of yesterday's 3 Year auction, which was nothing to write home about except for the surge in Indirect demand (and corresponding plunge in Direct take down), the Treasury just priced it latest soon to be POMO-ed 10 Year paper, $24 billion of it to be exact with a couple of reopenings scheduled in the near future, at a closing yield of 2.795% which was inside the 2.801% When Issued at 1 pm indicating solid demand dynamics during the auction process. That said, the Bid to Cover of 2.54 was well below both the January 2.68, and the TTM average of 2.69, and in fact was the lowest since the 2.44 print from last August. The internals were more solid, as Dealers took down 34.1%, below the 38.4% TTM average, while Indirects - like yesterday - soared to 49.7% of the final allocation, the highest since June's 51.7%. This means that Directs were left with 16.2% of the auction, or just below the 19.8% average. As a result of the auction failing to tail, the Treasury complex popped modestly higher in the aftermath of the announcement, although this bullish sentiment may not last unless DE Shaw links up its bond buying algo to the USDJPY to match its SPOO buying "logic."

And now we watch as Dealers flip their allotments right back to the Fed in the comding days.