Perhaps inspired by our article that the 10 Year was trading very special in repo this morning [5], touching -1.79%...
... as shorts had piled into the auction on hopes of covering ahead of what many had expected would be a weak auction, some "experts" predicted an imminent tail in today's auction. Well, moments ago the 10 year closed about as solid as they come, with the High Yield of 2.139% pricing 0.4 bps through the When Issued of 2.143%, dampening any hopes to cover profitable shorts into the auction, and ending any speculation about a tail.
The Bid to Cover rose from 2.62 to 2.65, in line with the TTM average of 2.71, with the biggest wildcard once again being Indirect, aka mostly foreign central banks, bidders taking down 58.6% of the auction, a fraction below the 59.5% in February, and except for last month's auction, the highest indirect takedown since December 2011. Directs ended up with 31.2% of the total.
[6]
And with the second of this week's three auctions down, we now look forward to tomorrow's 30 Year, which as the table above shows, was also trading special in early repo markets. Will the shortage accelerate into tomorrow as even more shorts pile up, or will tomorrow be different, find out in just about 24 hours.
