Ugly, Tailing 3Y Auction Prices At Lowest Bid To Cover Since May 2009

It is not a pretty start to this week's bond auctions.

Moments ago the US Treasury sold $33BN in 3Y bonds in what was an ugly, tailing auction, with the High Yield of 2.685% not only tailing the When Issued 2.679%, but also the highest since the summer of 2007, and 2 bps above June's strong 2.664% 3Y yield.

The internals were even uglier: the Bid to Cover tumbled from 2.83 in Jun to 2.51, far below the 6 auction average of 2.92 and the lowest since April 2009.

One reason for the ugly auction may be that for the second month in a row, the Indirect bid i.e. foreign central bank, slumped, and was just 39.6%, in line with last month's 39.4%. Directs took down 9.1% of the auction which left a whopping 51.3% going to Dealer banks who ended up with a majority of the takedown for the second month in a row.

Overall a very ugly auction, and coming at a time of heightened curve inversion fears, it may indicate progressively lower interest in owning the short end which keeps on rising with every passing month as the Fed continues to hike rates.

Is the weakness in the primary market specific to this point on the curve or is it more systemic? Find out tomorrow when the Treasury offers a $22 billion reopening in benchmark 10Y paper.

Comments

Quivering Lip Tue, 07/10/2018 - 13:36 Permalink

How's the FED unwinding going.

Bwahahahahaha

I'm sure there's some out there wanting to buy bonds yielding 1.5%

Does anyone even know what the duration of the their bonds/notes look like on the balance sheet?

Or do they just keep buying more when original notes bonds mature?

youngman Tue, 07/10/2018 - 13:37 Permalink

This is just the start of all foreign buyers leaving the game...and maybe a few pensions will keep in the game...but it will end up that our Central Bank will just buy from the dealers everything they issue...with a nice fee of course to make it look legit 

Consuelo Tue, 07/10/2018 - 14:00 Permalink

"Is the weakness in the primary market specific to this point on the curve or is it more systemic? Find out tomorrow when the Treasury offers a $22 billion reopening in benchmark 10Y paper."

 

Eerily reminiscent of a Rocky & Bullwinkle cartoon episode ending...

 

 

 

 

Money_for_Nothing Tue, 07/10/2018 - 14:02 Permalink

How about a $USD shortage causing this? Central Banks are spending all their $USD defending their fiat. None left over to buy $UST.

"my prediction is 10 year gonna struggle too"
If the above prediction comes true then we would have evidence of a $USD shortage.

mo mule Tue, 07/10/2018 - 14:06 Permalink

This is still a classic example of a snake, (Fed) eating it's own tail!  They give money to big banks, both domestic and foreign thru the repo back door Fed market and they in turn buy the bonds.  So were is the money coming form? Well the Rothschild clan though their bank holdings of the BIS and ownership of the Fed is creating it out of thin air. Of course the interest on this newly created monies is owe by the American people ultimately to Rothschild clan as they are ones who extending the credit.. Hopefully none of the principal will be repaid. But the interest on it surely is being paid at present.......that's how I see it anyway.................s//////////