Moments ago the Treasury sold a fresh batch [4]of $24 billion in 10 year bonds (CUSIP: VB3 - remember it: it will promptly be monetized by the Fed in the next few POMOs) in an auction that can at best be described as weak. The When Issued had been trading 1.80% moments before the announcement that the auction priced at a high yield of 1.81%: a 1 bp tail, and quite a bit wider than market levels in the 10 Year seen earlier today. The result surprised the market and pushed the bond complex lower. The internals were not good either: the Bid to Cover was 2.70, the lowest since February, and far below the TTM average of 2.96. Notably, as the chart below shows, the BTC ratio has been declining slowly over the past year. The Indirects took down 33.9%, below the average of 37.07%, Directs took only 16.9%, the lowest since January, leaving Primary Dealers with the lion's share or 49.2%, or well above the past 12 month average of 40%. And since correlation algos are pegged to see any bond weakness as good for stocks (as pretty much everything else too), the weak bond auction was an "trigger" for the algos to send the stock market to fresh all time record highs.
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