The U.S. Treasury will auction of $36 billion of 10 year notes at the top of the hour.
The current 10 yield is trading at 1.72%. That is up from the yield last month at 1.518% as investors brace for more Fed tightening in 2022. The real yields are also getting more negative as inflation rises.
The last six month average of major components shows:
- bid to cover 2.50X. The last auction at a bid the cover of 2.43X
- Directs - a measure of domestic demand - six month average is at 16.1% with last month at 17.8%
- Indirects - a measure of international demand - six month average is 70.5% with last month coming in at 68.8%
- Dealers (they take the balance for distribution) six month average is 13.5%. Last month the dealers took down 13.4%.
Yesterday the three year note auction was met by high international demand. The spread between US yields and European yields remains in favor of the US.
In the 10 year benchmark note sector, the Italian 10 year yield is lower by about 0.40%, while the German 10 year yield is lower by 1.787%. So there is a cushion for international bidders versus the the US 10 year yield (all things being equal).
Benchmark 10 year yields in Europe and the US
