Back in September, just before the FOMC announcement in which Bernanke shocked everyone by not announcing a Taper, the 3 Year priced in the early part of the month at a yield of 0.913%: the highest since May 2011. After that, following the delay of the taper, yields dipped, but are once again rising higher, and moments ago the $30 billion 3 Year auction priced - in the first post-taper auction - at a high yield of 0.799%, a jump from the December 0.631%, and a tiny tail to the When Issued stopping at 0.797%, but still shy of the September wides.
Also of note: last month's jump in the Bid to Cover, which had risen to 3.553, is once again declining, and today printed at 3.255 below the TTM average of 3.349. The internals were notable for the dramatic spike in Direct Bids, whose takedown doubled from 12% in December to 22.6%, the highest since Marh 2013 when Directs were buying the short end with reckless abandon. And with Indirects taking down a lowly 28% (compared to the TTM average of 30.5%), this means Dealers were once again left holding just half of the bag, or 49.4% compared to 49.6% last month. Altogether, a "normal" auction, but keep an eye on those creeping higher yields. Should the Fed continue to signal tapering in the coming months, expect the yield to hit 1% at some point in the coming 3-6 months.
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