If markets were concerned about demand for US Treasury paper in light of recently surging yields, today’s just concluded 30Y auction may have set their minds at ease, following a strong 30 Year auction, which saw that high yield print at 3.152%, stopping through then When Issued by a whopping 1.3 bps – the biggest stop through since June 2015 – although some 25 bps higher than the November auction and the highest closing yield since the 3.24% in September of 2014.
The internals were notably solid, with the Bid to Cover rising from 2.11 in Nov to 2.39, above the 12MMA of 2.30. However it was the surge in Indirects that was the most notable aspect of today’s auction: printing at 63.9%, the Indirect takedown was nearly 10% higher than what was seen in November and above the 12 month average of 61.3%. And with Directs taking down 9.3%, Dealers were left with just 26.8% of the auction, the lowest since July.
The strong result was surprising considering the risk of a major surprise out of the Fed tomorrow, when the Fed is expected to reveal only its second rate hike since the financial crisis.
So to summarize, a far more solid auction that the 3 and 10Y auctions observed yesterday in the FOMC-shortened week.
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