Solid 2Y Auction Stops Through Despite Plunge In Yields

Solid 2Y Auction Stops Through Despite Plunge In Yields

In a day when yields are plunging, just as we said they would now that the head and shoulders formation is obvious for all to see…

… moments ago the US Treasury sold $47BN in 2Y paper in an auction which many thought would bomb due to the collapse in yields ahead of the sale. It didn’t, and instead, pricing at a high yield of 2.526%, the auction stopped through the When Issued 2.526% by 0.7bps. More importantly, this was the first decline in the 2Y high yield since July 2021.

The Bid to Cover was average, printing at 2.61, below last month’s 2.74 but just above the six-auction average of 2.59.

The internals were also solid: while Indirects dropped from 66.0% to 62.6%, they were still one of the highest on record and well above the recent average of 59.9%. And with Directs taking down 22.0%, just below the 26.1% recent average, Dealers were left holding just 15.4%, one of the lowest awards on record, and well below the 22.2% six-auction average.

Overall, this was a surprisingly solid – if not stellar – auction, and despite the plunge in yields the market is clearly pouring into short-dated paper, the latest confirmation that markets are betting an end to the Fed’s rate hikes is just a matter of time.

Tyler Durden
Tue, 05/24/2022 – 13:21

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