Strong 2 Year Auction Prices At Highest Yield Since April 2011, Highest Bid To Cover Since February

On one hand today's 2 Year bond auction priced, as expected, at the widest level since April 2011, or 0.589%, on rising concerns that the Fed may, all economic signs to the contrary, raise rates in the coming year.

On the other hand, this was arguably the strongest 2 Year auction at this yield, in all of 2014. First, the auction stopped through a substantial 0.6bps through the 0.595% When Issued. Then, the Bid to Cover was a solid 3.564, the second highest of 2014, only lower than February's 3.605. Finally, the internals also were very solid, with Directs taking down 16.11% and Indirects holding 40.91%, the most since March 2014, leaving only 42.98% to the Dealers, which was also the lowest since March.

A trend has emerged: the higher that yield, the more the demand, which is what one would expect in a world without endless Fed manipulation and central-planning. Could we be getting some hints of normalization? And how soon until yields resume their downward path as the current rate hike scare blows off yet agaian?

Comments

[LawsofPhysics]

Tick tock...   ..."tapering...  ...hello Belgium?"

[101 years and c...]

getting paid almost .6% over 2 years is better than losing 40% (in stocks) during the next 2 years.

[El Vaquero]

Just wait until the stock market is allowed to crash.  Yields can be driven down again in the absence of Fed printing.  And after the effect of a flight to "safety" wears off, there's always retirement accounts to pilfer.  Of course, then it won't just be the young who are more pro secessionist.