After last week's solid auctions, traders were optimistically eyeing today's 20Y auction - in the form of a 19-Yyear 10-Month reopening - as some speculated that just because this may be the last fully-sized, $24BN auction before the Treasury starts shrinking the notional next month, demand would be stellar. It wasn't.
Stopping at 2.100%, more than 30bps above the September 1.795% high yield, the auction not only had the highest yield since June, but tailed dramatically to the 2.075% When Issued, the biggest tail in the 20Y auction history (which, of course, is not that long since the first auction was just last May).
The ugliness spread to the bid to cover, which slumped to 2.25 from 2.36, well below the six auction average of 2.36 and also the lowest since May.
The internals were not quite as bad with Indirects (i.e., foreigners) rising to 64.8% the highest since July 2020 and the second highest on record, and with Directs taking down 15.6% or a drop from last month's 18.9%, Dealers were left holding 19.6% of the auction the most since July.
Overall this was an ugly auction if looking at the yield, but actually quite solid if simply looking at bidside demand in the form of surging Indirects.