Ugly, Tailing 3Y Auction Sees Record Directs As Foreign Demand Slides
With bond long-ends blowing up across the globe, driven by among other things, justified fears of a looming surge in supply, moments ago the US Treasury sold $58 billion in 3Y notes. And while the auction consisted of relatively low duration paper, one could feel modest cracks in demand all the way near the front-end of the curve.
Here’s what happened: the auction prices at a high yield of 3.891%, this was about 9bps lower from the 3.972% last month, but it tailed the When Issued 3.887% by 0.4bps, the same tail as June and the 4th tail in the past 5 auctions.
The bid to cover was also subpar at 2.51, down from 2.52 last month, and the lowest since April as well as below the six-auction average of 2.61.
It was the internals that were most notable however, with Indirects awarded 54.1%, the lowest since Dec 2023, and with Dealers getting 16.5%, in line with the 15.1% recent average, Directs were left with a whopping 29.4%, the highest on record as they salvaged today’s auction which saw foreign bidders fade away.
Overall, this was an ugly, tailing 3Y auction which saw foreign demand slump and only the record surge in Directs managed to avoid what would have been a very ugly outcome to the short-end of the yield curve on a day when the long-end is already blowing up.
Not surprisingly, 10Y yields are trading near session highs with the news of the ugly auction not helping one bit.
Tyler Durden
Tue, 07/08/2025 – 13:47
