Yields Surge After Ugly 2Y Auction As Foreign Demand Tumbles

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Today’s first of two coupon auctions – the sale of $69 billion in 2Y paper (a 5Y auction follows at 1 pm) – priced at 11:31 am and it was ugly.Stopping at a high yield of 4.917%, today’s auction not only carried the highest yield since last October’s 5.055% but tailed the When Issued 4.907% by 1 basis point (this was the 3rd tail in the last four 2Y auctions).The bid to cover slumped to 2.41 from 2.66, and was not only below the six-auction average of 2.59 but was the lowest since November 2021.The internals were especially ugly, with Indirects awarded just 57.9%, down from 66.2% in April and the lowest since November’s 57.4%.(Click on image to enlarge)
And with Directs awarded 25.5%, the most since March 2022, left dealers holding 16.6% of the auction, the most since December 2023.(Click on image to enlarge)Overall, this was a very ugly auction which saw very weak demand from foreign buyers, forcing Direct bidders and Dealers to step in. No surprise then that 10Y yields spiked above 4.50% after the auction results were announced, hitting the highest level in two weeks as concerns about “higher for longer” refuse to go away.Boeing’s Starliner Crewed ISS Mission Will Still Launch Despite Helium LeakRegular Cannabis Users Exceeds Drinkers For First Time EverFirst Time Since GFC: Holders Of AAA ‘CRE-Backed’ Debt Hit With Losses

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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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