Stellar 10Y Auction Prices At Lowest Yield In One Year

After yesterday's dismal 3Y action which was nothing short of a disaster across virtually every metric, moments ago the US Treasury sold $24BN in the 9-Year-10-Month reopening of CUSIP 5M8, which was about as close to stellar as one can get after yesterday's fiasco.

The Auction priced at a high yield of 2.728%, stopping 0.8bps through the When Issued of 2.736%, and the lowest yield since January 2018, sharply lower than last month's 2.915%. The Bid to Cover meanwhile jumped from 2.35 to 2.51, in line with the historical range.

The internals were also strong, with Indirects taking down 56.9% of the auction, below the 65.3% 6 auction average, but that was largely due to the surge in Directs which doubled from 10.8% last month to 20.8%, the highest since May 2015. This left Dealers holding 22.3%, far below the 26.0 six auction average, and the lowest since January 2018.

Overall, a surprisingly strong auction, one which the bond market urgently needed especially after yesterday's unexpectedly poor sale of the 3Y paper.

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The most important takeaway, however, is that even with US Treasurys generating the lowest FX-hedged yields in the world, there is still substantial foreign demand for US paper. 

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