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.
Tue, 08/10/2021 – 13:14