If yesterday's 10 Year auction was a success, today's $16 billion issue of 30 Year paper [3]was poorly received by the market, with the 3.810% yield tailing the 3.796% When Issued, accentuated by a tumble in the Bid To Cover from 2.64 to 2.16, the third lowest in the past 4 years, excluding just the auctions from August of 2011 and 2013 when there was led indicated demand. The internals were less remarkable, with Directs taking down a stronger than average 18.3%, Indirects holding 35.3% of the auction and Dealers left with 46.5% of the auction. Overall, hardly the ringing endorsement in the long-end the Treasury needs.
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Perhaps in retrospect this weak auction is not that surprising. As we pointed out earlier, hedge funds have the most conviction in this "asset class" second only to the Nasdaq. And you know what they say about the herd...
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