Yesterday's 10 Year auction played a trick on the repo market, which was so short the underlying the repo was trading very special at -1.8%. Today, as we noted earlier, the shortness persisted, and not only in the 10Y but the 30Y as well, whose repo was negative for the second day in a row. Well, while the bet yesterday was wrong, today it was spot on, with the 30 Year reopening of 29-Year-11-month CUSIP RK6 pricing surprisingly weak, stunning the bond market when a whopping 2.1 bps tail was announced moments ago, following a High Yield announcement of 2.681%, well above the 2.66% When Issue.
As SMRA adds, the 30-year bond auctions stopped through their respective bidding deadlines by an average of 0.3 basis points over the past year, but the first reopening auctioned tended to go much better, and the average stopout rate of the four 2014 first reopenings was 1.7 basis points through the bidding deadline bid side.
The internals were very ugly as well, with the Bid to Cover tumbling from 2.258 to 2.18, the lowest since May 2014, and one of the lowest BTCs in vintage history. This compares to a 2.43 TTM average for the bid to cover.
Finally, while the Directs once again pulled back, taking down just 11.6%, the lowest since July, it was the Indirect demand that surprised to the upside, and with a whopping 51.9% of the takedown going to foreign central bank. This was the third highest in history, following a 52% and a record 53% Indirect take down in June and July of last year.
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Overall, a weak auction, and one which promptly dragged the entire curve lower, but mostly steeper.
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