2 Year Paper Sold At Highest Bid To Cover Since May As Yield Declines, Lowest Directs Since June 2013

If there is any concern of massive curve flattening, or even inversion, the bond market sure wasn't aware of it today when moments ago some $29 billion in 2 Year bonds were sold at a yield of 0.530%, stopping through the 0.532% When Issued, and below the 0.544% from last month which was the highest since May 2011.

The Bid to Cover rose from 3.220 to 3.479%, the highest since May's 3.519%, and certainly not hitting of any lack of demand for the short-end. The internals showed a marked move away from Directs, who took down just 12.14% of the auction, half of the TTM average of 23.4% and the lowest since June 2013, however this was more than offset by the surge in Indirects, whose 39.8% was the highest since March when they were allotted 40.93%. Finally, Dealers were left holding less than half of the bag, or 48.0%, only the first time PDs ended up with less than half the auction since March 2014. Overall, a rather strong auction, as can be further validated by looking at the move tighter across the curve.


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