Stellar 3Y Auction As Foreign Demand Jumps Ahead Of CPI Print

Stellar 3Y Auction As Foreign Demand Jumps Ahead Of CPI Print

While nerves may be rising ahead of tomorrow’s CPI print which – if it comes in hotter than expected – could ensure a taper announcement is coming as soon as this month, that was not on exhibit during today’s first of the week refunding coupon auction, in which the Treasury sold $58 billion in 3Y notes to surprisingly strong demand.

The high yield of 0.465% stopped through the 0.468% When Issued by 0.3bps, the biggest stop through since March and followed last month’s 0.2bps tail. The yield was modestly higher than last month’s 0.426%.

The bid to cover of 2.541 also came in strong, rising from last month’s 2.411 and also above the six-auction average of 2.450. In fact it was the highest since March 2021.

The internals were quite solid too with Inidrects awarded 55.4%, well above both July’s 53.2% and the six-auction average of 2.450. And with Directs taking down 18.4%, a number in line with recent auction and the highest since Dec 2019, meant that Dealers were left with just 26.2% which was the lowest since August 2017.

Altogether a very strong start to the week’s coupon issuance however it appears to have been priced in as 10Y barely shrugged in response. Tomorrow’s $41 billion 10Y auction will be another story, however the solid demand for the front-end today suggests that worries over tomorrow’s CPI print may be exaggerated.

Tyler Durden
Tue, 08/10/2021 – 13:14

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