Stellar 30Y Auction Has First Stop Through Since June, Sparks Algo Buying Frenzy

One month after an abysmal 30Y auction, and after 5 months of tailing 30Y sales, the mood was predictably downbeat ahead of today’s 30Y reopening of 29Y-11M cusip TV0, even though the concession was very generous thanks to the move wider in yields and which is why – contrary to conventional wisdom (captured in the always wrong MLIV auction preview) – we said that we would get a stop through today.

Time for a stop through: heading into today’s auction the 30Y has tailed each of the last 5 months.

— zerohedge (@zerohedge) December 12, 2023

Well, the consensus was wrong as usual and we were right because for the first time since June, the 30Y auction actually did stop through, pricing at 4.344%, 0.3bps through the When Issued 4.347%, and far below last month’s 4.769% (which was a 5.3bps tail); this was also the lowest high yield since August and a far cry from the auction cycle high of 4.837% hit in early October.

The bid to cover was also strong, printing at 2.429, the highest since September and above the six-auction average of 2.403%.

The internals were especially solid, with Indirects, or foreign buyers, awarded 68.5%, for above last month’s 60.1%, and also well above the six-auction average of 66.6%; in fact it was the highest Indirects since July. And with Directs awarded 14.2%, the lowest since August 2020, Dealers were left holding 17.3%, also well below last month’s 24.7%.

Overall, this was a stellar 30Y auction, and the solid reception clearly surprised people who were expecting another disaster; that’s why the reaction in the second market sent the yield sharply lower…

… and also sparked an algo buying frenzy with the NYSE TICK indicator surging to HOD of 1310.