If there was any doubt which way the market was leaning if not in stocks, then definitely in bonds, it was promptly crushed moments ago when the US sold $27 billion in 3 Year paper. The When Issued, which was trading at just shy of 1%, or 0.998% to be precise, suggested we could have our first 1% bond auction pricing since May of 2011. That however was not meant to be the case today when as a result of surprising demand for the short end, the Treasury sold TSYs at a high yield of 0.992%, stopping through the when issued by 6 bps, even if the final yield was still the highest in over three years.
The internals were also solid, with a 3.381 Bid to Cover, below last month's 3.414, but above the 12 month average of 3.337. Dealers took down just under half of the auction, or 49.1%, while the Indirect takedown surged from 26.5% to 38.2%, the highest since February's 42.0%. This means Directs, who got $3.4 billion of the final allocation, were left with only 12.7%, the lowest since December: is Pimco finally done loading up on the short end?
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