Another month, another launch of monthly bond issuance by the US Treasury which today sold its first salvo of $32 billion in 3 Year debt at a yield of 0.631%. This yield was better than the When Issued 0.638% indicating demand for the short-end of the curve is crept back after two consecutive auctions in which yields were consistently higher. However, the previously noted decline in Bid to Covers is persisting and as can be seen on the chart below appears to have peaked in the summer of 2012 and is all downhill from there. This auction's BTC of 3.214 was lower than July's 3.350 and well below the TTM average of 3.484. The internals were more impressive, however, with Directs allotted 14% of the auction and Dealers taking down 44.7% (with 3 Years no longer special in repo there was no Primary Dealer scramble to procure collateral). This meant Indirects ended up with 41.4% of the auction: this was the highest allocation to "foreigners" since the debt ceiling crisis or August 2011.
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Overall, and in keeping with the doldrums theme, a far more boring auction than some of the fireworks we have seen in the past two months.