With the market now certain that at least one rate cut will take place over the next 12 months, it is probably not a surprise that there would be pent up demand for today's 2Y auction. And sure enough, the Treasury announced blistering demand for today's 2Y paper, which priced at a yield of only 2.261%, the lowest since February 2018, and stopping through the When Issued 2.273% by 1.2bps, the biggest "stop through" since May 2016.
The internals were as impressive, with the Bid to Cover jumping from February's 2.50% to 2.604%, the highest since November, and above the 2.52 six auction average. The take down also showed a sharp rebound in foreign bidders, as Indirects soared from 38.6% to 56.0%, the highest since Jan 2018; after surging in February to 22.6%, Directs dropped taking down 13.3%, well below the 22.6% in February if just below the 14.7% six auction average, leaving Dealers holding 30.7%, the lowest since January.
Overall, today's auction showed very strong demand for the short-end of the curve, and we expect more of the same as markets - which are now fully in easing mode - expect yields to keep sliding over the next few years.