Treasury has just auctioned $44 billion 2 yr notes. The high yield was slightly above the 1pm current market bid ("when issued"), stopping out at 1.089%.
The bid to cover ratio was 2.91 , which means 1 award for every 2.91 bids. The bid to cover ratios at the last three 2 yr note auctions have been in the 3 handle...so while today's auction demand was not terrible, it wasnt "up to par" either.
Direct bidders were the major source of auction support, taking home a much larger than usual 19.3% of the auction. To put this is perspective, direct bidders are usually awarded somewhere in the range of 1-10% of the total auction amount, so 19% is pretty strong sponsorship from directs.
Primary Dealers took home 45.4% of the total auction, which is 21% of what they bid on, VERY CLOSE to recent averages, but much less than the days of 30-40% of what they bid on.
Indirect bidders ("ferners") were not as supportive as we would have hoped, taking home only 34.5% of the total auction (64.8% of what they bid though, this is above average). Compare a 34.5% total award to recent averages in the mid-40% range. MUCH LESS THAN NORMAL PARTICIPATION FROM OVERSEAS BIDDERS.
Here is a recap of the results:
YIELDS High 1.089 pct Median 1.040 pct Low 0.963 pct PRICE/ACCEPTANCES Price 99.824397 Accepted at high 59.68 pct Bid-to-cover ratio 2.91 AMOUNTS TENDERED AND ACCEPTED (dollars) Total accepted 44,000,044,500 Total public bids tendered 128,028,884,500 Competitive bids accepted 43,627,860,000 Noncompetitive bids accepted 372,184,500 Fed add-ons 1,304,048,200 Primary Dealer Tendered 92,180,000,000 Primary Dealer Accepted 19,954,360,000 Primary Dealer Hit Rate 21.6% of what they bid on Primary Dealer Total Award 45.4% of total auction Direct Bidder Tendered 12,039,000,000 Direct Bidder Accepted 8,494,000,000 Direct Bidder Hit Rate 70.6% of what they bid on Direct Bidder Total Award 19.3% of total auction Indirect Bidder Tendered 23,437,700,000 Indirect Bidder Accepted 15,179,500,000 Indirect Bidder Hit Rate 64.8% of what they bid on Indirect Bidder Total Award 34.5% of total auction
NOTE DETAILS Issued date Dec. 31, 2009 Maturity date Dec. 31, 2011 CUSIP number 912828ML1
After the auction...the market has barely budged. 10s are holding steady in a sideways trend channel....
"Rate sheet influential" MBS coupons are doing the same...grinding to the right in slow trading flows.
Since readers have been asking me to "grade" the auction. I give it a
Direct bidders had to do all the heavy lifting today. Weak participation from indirect bidders is not a sign of great auctions to come, plus I find it unlikely that direct bidders will keep up this pace all week. So the road ahead has an "apathetically average" AT BEST, outlook attached.
Plain and Simple: "Wait and see" with a bias towards higher rates heading into 2010.
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