Ugly 20Y Auction Sees Biggest Tail Since Oct 2022, Surge In Dealers

With secondary market yields tumbling in recent days following the Fed pivot, traders were closely watching today's 20Y auction to see if demand for paper would suffer in the primary market. We got the answer moments ago when the Treasury sold $13 billion in 20Y paper in what was a rather ugly auction.

Starting at the top, the auction priced at a high yield of 4.213%, which was more than half a percent below last month's 4.780% and was the lowest yields since July. It also tailed the When Issued 4.198% by a remarkable 1.5bps, the first tail in the tenor since August, and the biggest tail since October 2022.

The 2.56 BId to Cover was on the low side of recent auctions, down from 2.58 last month, and below the 2.67 recent average; it was also the west btc since March.

The internals were also quite ugly, with Indirects sliding to 66.4%, far below last month's 74.0% and the lowest since September. And with Directs awarded 20.7%, Dealers were left holding 12.9%, the highest Dealer take down Since October 22.

Overall, this was an especially ugly auction, and one which sent yields higher across the curve, if below session highs and the 10Y well below the 4% barrier which proved to be key resistance, then support for so many months.