Wed, 08/12/2020 – 13:18
The record refunding week’s most watched auction was of course today’s sale of a record amount of 10Y paper, and at some $38BN for sale, we do mean record: consider that in 1981 the 10Y auction was under $2BN, it is now… well, see for yourselves.
So how did the auction go? Well, following the sharp back up in yields on Monday and Tuesday, despite the record large auction size we would not get another record low yield… although it was close. With the When Issued trading at 0.681%, the auction stopped through the WI by 0.4bps, at 0.677% which however was a little over 2bps above July’s 0.653%.
The Bid to Cover also dipped, printing at 2.41 vs 2.62 last month and below the 2.52 six auction average.
The internals, however, were more solid with Indirects taking down 65.4%, up from 63.4% last month, and above the 61.3 recent average. And with Directs taking down 14.7%, just above the 13.2% recent average, Dealers were left with 19.8%.
In short, a very strong auction despite the record size, one which took advantage of the big concession that opened up last week and sparked a surge in demand, and which we expect to resume printing record low yields next month and thereafter because the Fed can no longer afford even a modest jump in rates.
And with that we now look to tomorrow’s last for the refunding week 30Y auction, which will also be a record size.
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Author: Tyler Durden
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