US treasury auctions off $33 billion of 10 year notes at a:

  • High yield of 2.96%
  • WI level was at 2.94% at the auction time
  • Bid to cover 2.34X vs. the six-month average of 2.50X
  • Directs 18.0% vs. six-month average of 17.6%
  • Indirects 61.3% vs. six-month average of 68.3%
  • The 2 BP tail was higher than the six-month average of 0.7 basis points

Auction grade: D-

The only redeeming quality of the 10 year auction was that the domestic demand as measured by direct bidders was slightly higher than the six-month average. International demand was well below the six-month average. Moreover, the high yield was a full 2 basis points above the WI level at the time of the auction. That compares to the average tale of 0.7 basis points over the last 6 auctions.

In contrast to the 3 year auction, investors were not enamored with the yield after 2 days of price rally which lower the yield heading into the auction.