Solid 3Y Auction Stops Through Ahead Of Friday's CPI Report

With 10Y yields knocking on 4.80%, and threatening to blow out to 5% - if not beyond - there was plenty of interest in the outcome of today's 3Y auction, especially since tomorrow the Treasury starts the new and improved bond buybacks. And now that the auction has priced, we can say that there was plenty of demand. 

The sale of $58BN in 3Y paper priced at a high yield of 4.474%, which was up from 4.291% in August and the highest since July 2024. It also stopped through the When Issued 4.475% by one basis point; it was the third stop through in a row indicating there is hardly any shortage of demand for the short end. 

The bid to cover was 2.722, virtually unchanged from last month's 2.712 and better than the 2.621 recent average.

Internals were less solid: foreign buyers took down 62.15%, modestly below last month's 64.24% and below the recent average of 65.51%. And with Directs awarded a red hot 26.9%, the most since February, Dealers were left holding 10.91%, down from 11.74% in July and the second lowest of 2026.

Overall, this was a solid auction, and one which suggests that the bond market is hardly worried about Friday's CPI report or that the Fed will go full hawk next week when there is roughly a 50% chance Warsh hikes rates.