Kicking off the weekly Treasury issuance was today's 3 Year auction which was another very strong auction, with the High Yield of 1.104%, despite being the highest since April 2011, pricing 1.1 bps inside of the When Issued at 1.115% at 1 pm. The Bid to Cover of 3.33 was right on top of the TTM average, and just a fraction below the 3.345 in January.
But the real story was in the internals, which again saw subdued Directs interest, who took down 8% of the final allotment, it was the Indirects (i.e., foreign central banks) which once again loaded up, taking down 51.4% of the auction, which was also the highest Indirect takedown since March 2010. This meant dealers were left with 40.5% of the issue, weill below the TTM average of 47%, which is understandable since in the lack of POMO, dealers can no longer "flip that bond" right back to the Fed in the next POMO in a few days.
Altogether a very strong auction, and certainly another confirmation that nobody is concerned about a surge in short-term rates any time soon.

