2017 Auctions Kick Off With Strong Showing By 3 Year Paper Courtesy Of Short Squeeze

Tyler Durden's picture

Ahead of today's 3Y auction, the first coupon auction of the year, much of the curve was trading normal in repo, with the only notable pressure as expected on the 3-year, which was trading special at -0.50% for On The Run issues, suggesting there could be a modest upside surprise in today's auction.

Which is why it was not a surprise that with courtesy of the sizable short overhang coming into 1pm, today's sale of $24 billion in 3Y paper printed stronger than expected, coming in at a high yield of 1.472%, stopping through the When Issued by 0.6 bps, and 2 bps higher than the December 3Y auction of 1.452%.

The internals came in strong than expected as well, with the Bid to Cover printing at 2.968, a big jump from last month's 2.653, and the highest since December 2015. Indirect Bidders received 54.6% of the takedown, the above last month's low 42.6%, and the highest since September 2016; Directs were left holding 6.6% which meant 38.8% went to Dealers, the lowest since October.

Overall, an uneventful auction ahead of tomorrow's 10Y which will likely be watched much closer.

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Roguebeekeeper's picture

I'd hate to own anything that didn't even keep pace with inflation on a regular basis.