After yesterday's 3 Year auction saw a blistering surge in Direct bidder demand (as a result of a substantial negative rate in repo), we were not at all surprised to see that today's 10 Year reopening auction of $21 billion was a likewise solid (even if tailing fractionally to the When Issued 2.232%) issue printing at 2.233% with 23.93% allotment, with the bid to cover rising from 2.58 to 2.64, the highest since September.
Yet despite the tiny tail, foreign demand in the form of Indirect Bids was superb, rising to 62%, which excluding October's 62.2% would make the Indirect takedown in today's reopening the highest since 2011.
And while foreign central bank demand was superb, perhaps the biggest reason why there was no big surprises in today's auction is that just like yesterday the 3-year and 10-year note had traded special through this week's auctions as can be seen in the chart below, which shows that the 10Y was -0.50% coming into the auction and suggests that like yesterday there was an element of covering shorts into the primary issuance.
Overall, for the last 10 Year auction supposedly before the Fed's first rate hike in 9 years, the action was decidedly calm and collected, and may be hinting that the Fed just may change its mind in the next 7 days.
