Yields Plunge After Strongest 10Y Auction On Record

Yields Plunge After Strongest 10Y Auction On Record

After yesterday’s solid 3Y auction, we speculated that demand for today’s benchmark 10Y refunding auction would depend completely on today’s CPI print. Well, after the first CPI miss since February earlier today, it was full speed ahead and nowhere was that more obvious than in the just concluded sale of $41 billion in 10Y paper which may have been the strongest 10Y auction in years, if not history.

Starting at the top, the high yield of 1.34% was a stunner because the 10Y When Issued was trading at 1.372% just moments before the auction suggesting a burst of demand into the 1pm deadline. This was the biggest stop through in our record which goes back some 7 years, cementing just how furious demand for today’s auction was.

The Bid to Cover surged from 2.39 to 2.65 which was the highest since May 2020; naturally it was far above the six-auction average of 2.42.

But it was the internals that were the biggest surprise because with Indirects taking down 77.2%, this was the highest award to foreign buyers on record! And with Indirects taking an all time high, while Directs were more or less in line at 13.1%, down from 17.5% last month, Dealers were left with a record low award, taking down just 9.6%, the lowest on record.

Needless to say, this was not only a whopper of an auction, but perhaps the strongest 10Y auction in recent history, a blow out in virtually every category…

… which also explains why 10Y yields have plunged from 1.35% just before the auction to as low as 1.30% in the moments right after as Treasury shorts get another monkeyhammering just as they were hoping that the runway to 2% was finally visible…

Tyler Durden
Wed, 08/11/2021 – 13:16

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