Solid 3Y Auction Sends Yields To Session Lows

The results from the week’s first refunding auction are out and they were solid, with the Treasury selling $54BN in 3Y paper at a high yield of 4.169%, up about 6bps from last month’s 4.105% but stopping 0.8bps through the 4.177% When Issued.

The rest of the auction was slightly lackluster: the bid to cover of 2.581 was a drop from last month’s 2.672 (but above December’s 2.416) and below the recent average of 2.662.

The internals were on the strong side, with Indirects awarded 66.0%, up from last month’s 65.3% and the highest since August, and with Directs taking 18.3% (up from 16.84% last month but below the recent average of 19.56%) Dealers were left holding 15.7%, the lowest also since August.

The market welcomed the auction results, which were neither too cold nor too hot, and with yields sliding all session, the auction merely cemented the trend lower, at least until fears of more tightening and the endless supply coming down the pipe reverses the trend.

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