In a day when the relentless hate for stocks finally means love for Treasuries as traders start to price in the inevitable coming recession (and stocks will too, just after tomorrow’s CPI print which will miss expectations badly), and when the 10Y yield has tumbled, moments ago the US Treasury sold $45BN in 3Y paper – the lowest amount going back to the summer of 2020 – in a solid auction.
The high yield of 2.809% was the highest going back to November 2018, and above April’s 2.738% (but not by too much) as the pace of rate increases is finally slowing. The auction stopped through the When Issued 2.812% by 0.3bps, the 5th stop through int he past 6 auctions.
The bid to cover was far more remarkable, and at 2.595, it was not only above the April 2.482 but was the highest going back to March 2021.
The internals were also solid, with Indirects taking down 62.0%, the highest since February’s record 68.5% and far higher than April’s 53.4%. And with Directs awarded 18.04%, above the six-auction average, Dealers were left holding just 20% of the auction, a record low!
Bottom line a stellar, stopping-through auction, even without the help of Dealers who know they can’t flip the bonds to the Fed’s QE any more (at least until QE returns in a few months, of course).