Following a disappointing month of Treasury auctions, one which saw last month's 3Y issue see a plunge in Indirect bidders which dropped to 44.7%, August has started off strongly with the sale of $24 billion in 3 Year paper, which moments ago sold at a high yield of 0.85%, 1 bps inside the When Issued 0.86%, and with a Bid to Cover which surged from last month's 2.686 to 2.984, the highest since December.
The internals were likewise impressive, with Indirects taking down 56.9%, the highest since May, leaving Dealers holding 33.7%, the lowest in 4 months and Directs left holding 9.5%.
The market was surprised by the strong demand for the short-end, easily the strongest auction in at least 3 motnhs, and moments after the details were announced, the yield on the 10Y dropped to session lows as suddenly concerns about a buyers strike have disappeared.
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