It appears that sudden drop in indirect demand for today's 3Y auction 90 minutes ago was a false alarm, because moments ago the Treasury sold $38BN in 10Y paper in what was for lack of a better word, a stellar auction.
Stopping at a high yield of 1.584%, the auction stopped through the When Issued 1.590% by a generous 0.6bps. This was the sixth consecutive 10Y auction that has stopped through. That said, the high yield was also well above last month's 1.338%, and the auction cleared at the highest yield since May's 1.684%.
The bid to cover of 2.58 was virtually unchanged from last month's 2.59 and was above the recent average of 2.50.
More importantly, the internals were also solid, and while we saw a bid drop in Indirect participation in today's 3Y auction, there was no sign of that in the 10Y, with Indirects taking down 71.1%, and identical number to last month, and above last month's 66.6%. And with Directs being awarded 17.7%, also in line with last month's 16.6%, Dealers were allotted 11.2%, just below last month's 12.3% and below the six-auction average of 17.32%.
In summary, a surprisingly solid auction after today's disappointing 3Y, and one which helped push benchmark yields to session lows, with the 10Y now trading at 1.5856%, just off the best levels for the day.