And now the bond market is sending a worrying signal.

Moments ago, the Treasury sold $40 billion in 2 Year paper, and despite, or perhaps due to the sharp drop in yield, which declined from 2.827% to 2.619%, tailing the When issued 2.600% by 0.19bps, and the lowest yield since June, this was one of the ugliest 2Y auction in recent years despite the Fed's recent dovish shift.

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But the biggest surprise was the plunge in the bid to cover, which dropped from 2.652 to 2.31, the lowest since December 2008 as buyer appeared to suddenly pull back. This was also reflected in the internals, where Indirects took down 45.0%, or in line with recent averages, and almost unchanged from last month, it was the renewed drop in Directs that was surprising, with the group's takedown only 7.9%, the lowest since July 2013 with the one notable exception of October 2018 which saw Direct takedowns for all auctions plunge. This left dealers with a hefty 47.2%, the highest since December 2016.

And with US bond issuance only set to rise in the coming year to fund Trump's stimulus program which is set to become a headwind to the economy in 2019, expect many more such ugly auctions; it is no coincidence that #4 of Deutsche Bank's top risks for 2019 was "tailing US Treasury auctions and/or declining bid-to-cover rations" - we just got a vivid example of one today.

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