After yesterday’s mediocre 3Y auction, today we had the highlight of the week’s coupon issuance when the Treasury sold $39BN in benchmark 10Y paper. And amid a painful selloff that pushed 10Y yields above 4.20%, the auction wasn’t too bad all things considered.
First the ugly: the auction priced at a high yield of 4.217%, up from 4.177% in February and the highest since last August. Why ugle? Because the auction tailed the When Issued 4.210% by 0.7bps, the second tail in a row and 4 of the past 6.
The rest of the auction was more solid, starting with the bid to cover, which jumped from 2.388 to 2.449, if still below the recent six-auction average of 2.51 which however was pulled higher by two outlier high BtCs in recent days.
The internals were also solid: Indirects jumped to 74.45% from 64.54%, which was the highest allotment to foreign buyers since September. And with Directs taking 12.83%, Dealers were left holding just 12.7%, which however was on the high side of the recent auction average of 8.63%.
Overall this was a solid auction, despite the large intraday selloff and despite the tail, and suggests that unlike other asset classes, the bond market is certainly not concerned about runaway cost-push inflation in the months to come.
