Today's 3 Year $30 billion auction, if not remarkable, was memorable for two things: the high yield, coming at 0.895% precisely on top of the When Issued, was materially above the March 0.802% which is to be expected courtesy of the Fed's "dots", as the short end keeps rising, and in fact was the highest pricing yield since the 0.913% seen last in September. And not surprisingly, the Bid To Cover picked up to 3.361, above the TTM average of 3.286, to celebrate the higher yield offered on "near money good" collateral, if hardly surging to all time BTC high recorded long ago in October 2012.
The other memorable aspect of today's auction: Direct Bidders took down 24% of the auction, or $7.2 billion. This was by far the strongest indication of interest and allottment to Directs (remember: the dealers are now furious that Directs keep getting more of the allotment as per the latest TBAC document) in 2014, and was the highest Direct take down in fact since February of 2013.The flipside: Indirect take down was just 27.7% - the lowest since last April.
As for what happens should yields on the short end continue to levitate ever higher, just ask Janet Yellen, and the US which had a record $17.6 trillion in debt most recently.
Finally, what the ongoing flattening of the curve means for bank NIMs better not to ask, period.
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