10 Year Auction Tails Despite Strongest Foreign Central Bank Demand Since January

Following the earlier blockbuster 3Y auction, which stopped through and printed unexpectedly strong metrics in every possible category, moments ago the US followed up with today’s second auction, a 9-year-11-month reopening of CUSIP X88, in which $20 billion in paper was sold, once again largely to willing foreign bidders, which however unlike today’s earlier auction priced at a high yield of 2.195%, tailing modestly the When Issued of 2.188% by 0.7 bps. This was the lowest 10Y auction stop since February, and was over 20bps below the 2.40% in May.

The tail may have been the result of the move in the curve following the earlier auction as demand for various maturities sought to find equilibrium prices along the spline. Incidentally, this was also the 3rd consecutive tailing 10Y auction in a row, and 6th of the last 8.

Despite the tail, the internals were strong, with the Bid to Cover coming in at 2.54, the highest since March, and above both May’s 2.33 and the 6 month average of 2.45. Indirect demand rebounded, with foreign central banks taking down 66.1% of the auction, above 60.7% in May, and the highest since January. Directs were awarded 5.3%, in line with recent auctions, if below the 6 month average due to the March 15.7% outlier print. Dealers were left with 29.6%, below the 34.2% in March and almost on top of the 6 month average of 28.3%. 

Overall, a strongish auction, if not quite the blockbuster that priced 90 minutes earlier.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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