Ugly 3Y Auction Tails The Most In Over A Year As Foreign Buyers Flee Ahead Of CPI

The first coupon auction of the week and the month is in the history books and boy, was it ugly: maybe it was nerves ahead of tomorrow's CPI, maybe it was the realization that there is a lot more where this came from. A LOT more.

With $58 billion in 3Y paper for sale today, tied for the biggest amount on record for sale in the tenor...

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... the reception was anything but warm.

The high yield of today's auction was 4.548%, up markedly from last month's 4.256% and the highest since November's 4.701%, the auction tailed the When Issued 4.528% by 2.0bps, which was not only the first tail after 3 stopping though auction, but the biggest tail since February 2023.

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The bid to cover dropped to 2.50% from 2.60%; it was the lowest since December's 2.42 and well below the six-auction average of 2.584%.

The internals were also ugly, with foreign demand fading as Indirects took down just 60.3%, the lowest since December's 52.1 (and below the 62.3 recent average), leaving 20.4 to Directs, the most since December, and Dealers awarded 19.31T, the most since, you guessed it, December.

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In response to the auction, yields - which were sliding all day in a flight to safety as stocks dumped - moved higher by about 2 bps although remained near session lows amid the general selling everywhere else.

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That said, if tomorrow's CPI ends up being hot again, watch out below as all of today's buyers end up being deeply underwater in less than 24 hours.


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