Following the auction of the latest $32 billion in 3 year bonds, the market is expected to relax as based on the optic the auction was a stunning success, with a High Yield of 0.352%, higher than just the 0.334% hit in September when the market was collapsing. Yet the Bid To Cover of 3.624 was the highest ever in the series of the bond. Now the bad news: Primary Dealers once again accounted for well over 53.9% of the auction: or about $17 billion, which will be promptly repo'ed back to the Fed with the proceeds used for various other purposes. In other words, the clear demand for $15 billion came in the form of Indirects taking down 39.1% and Directs with 7.0%. Nonetheless, with the When Issued trading at 0.36%, there is no doubt that the auction was a smashing success, under the parameters of the US bond issuance regime. In the meantime, we await to see what happens to German Bund auctions in the next few days if the yield once again collapses, and there is just not enough demand at auction.