With the Fed's first rate hike in nearly a decade set to take place next Wednesday, and a move up from the lower bound precisely 7 years after the Fed cut rates to zero for the first time, there was some trepidation that today's 3 Year auction could turn nasty. That did not happen, and instead the Treasury managed to sell $24 billion in 3 year paper on quite reasonable terms, with the high yield printing at 1.255%, stopping through the When Issued by 0.9 bps.
The internals were also solid, with the Bid to Cover rising from last month's 2.824 to a respectable 3.14, while the Primary Dealer take down of just 34% was the lowest since May of 2010. The other demand came from Indirects who accounted for 47.4% of the final placement, fractionally below the TTM average of 48.4%, while Direct demand surged from 15.1% to 18.6%, well above the TTM average of 10.7% and the highest since September of 2014.
Then again considering the plethora of specials on the curve, which included both the 2Y, 3Y and the 10Y, it is hardly surprising that many took opportunity to cover the structural short headed into today's auction by purchasing paper in the primary market.
