Solid 2Y Auction Sees Most Foreign Buyers Since Last Summer

With both the FOMC and the Treasury Refunding on deck next week, some were wondering if today’s 2Y auction would hint at possible indigestion when it comes to the short end. It did not: moments ago the US sold $60BN in 2Y paper in what was a solid auction, which priced at 4.365%, on the screws with the When Issued, and modestly above last month’s 4.314%.

The bid to cover was 2.571, down from last month’s 2.679 and below the recent average of 2.72 although solidly in the 2.5-3.0 corridor established in the past decade.

Where the auction was especially strong was the internals, which saw Indirects, i.e., foreign buyers, take down 65.3%, up notably from 61.9% in December and the highest since last July (and clearly well above the six-auction average of 62.8%), And with Directs awarded 19.9% (modestly below the recent average of 20.9%), Dealers were left holding 14.8%, the lowest since last September.

Since the auction was solid, if not spectacular, there was virtually no market reaction, and the 10Y yield was unchanged at 4.14% after the news.