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30Y Auction Limps Through The Finish Line Minutes After Bullard Sparks Bond Market Chaos

Tyler Durden's Photo
by Tyler Durden
Thursday, Feb 10, 2022 - 06:14 PM

Not great, not terrible: that's the best way to describe the just concluded 30Y auction.

With bonds turmoiling in the past 10 minutes following the latest round of shockingly hawkish comments from the Fed's Bullard, some suggested that it may not be the worst idea to push back today's $23 billion 30-year Treasury auction to tomorrow...

... amid fears that the burst in bond market chaos could lead to a repeat of last February's 7Y auction disaster.

Well, with the auction pricing moments ago, the good news is that we didn't have a failed auction. The bad news is that the auction was nowhere near as stellar as the blockbuster 3Y and 10Y auctions earlier this week (both of which are now deep underwater).

So what happened: the Treasury sold $23BN in 30Y notes at a 2.340% high yield, sharply higher than last month's 2.075%, the highest since May 2021 and a tail of 1.1bps above the When Issued.

The bid to cover of 2.302 was actually not that bad, and came right on top of the six-auction average of 2.305 (and below last month's 2.354).

The internals were also actually not too bad: Indirects took down 68.0%, above last month's 65.0% and well above the 64.3% recent average. And with Directs taking down 17.8%, Dealers were left holding just 14.3%, the lowest since October.

In response, yields initially spiked higher, although on a day like today when everything has exploded, it didn't really make much of a dent since the 10Y was already trading well north of 2.00% and the 30Y above 2.30%. In fact, despite the ugly auction, yields eventually dipped after pushing to session wides, as the market scrambles to triangulate what is the correct price now that everything is in flux, the economy is overheating and a recession appears inevitable, the only question is when.

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