There was some anticipation heading into today's 2 Year auction, which as disclosed previously, represented the first drop in nominal issuance by $1 billion from the prevailing 2 Year size over the past several years, when as a result of reduce budget funding needs "only" $34 billion was auctioned off instead of the $35 billion recent average. Yet despite the tiny reduction in nominal, the auction was hardly a blockbuster, and if anything it was rather lackluster, with the high yield pricing at 0.386%, better than the 0.389% When Issued but certainly above July's 0.336%. The Bid to Cover also posted a modest improvement, from 3.08x last to 3.21x, however this was well below the TTM average of 3.53x. As can be seen on the chart below, auction BTC levels have been declining consistently since peaking in late 2012. Finally, the internal breakdown was generally as expected, with Directs taking down 26.1%, higher than post last month's 16.37% and the TTM average of 21.2% and the highest since April, Dealers holding on to 54.6% of the auction, and Indirects ending up with just 19.30%, the lowest such allocation since January of this year.
Overall, an auction which should have been much stronger considering the ongoing equity and development market rout. Are Bernanke tapering concerns overriding even the Great War Rotation safety bid?
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