After two consecutive tailing auctions, now that the Fed is cutting rates, moments ago the US Treasury sold $40 billion in 2 year paper in what was the best 2Y auction in years.
Stopping at a high yield of 1.612%, the high yield stopped through the When Issued by 0.1%, ending the streak of two tailing auctions, and just above last month’s 1.516% yield, which was the lowest going back to the summer of 2017.
The Bid to Cover rebounded from last month’s 2.598 to 2.636, the highest since May 2019 and above the six auction average of 2.59.
Finally, the internals were solid as well, with Indirects taking down a whopping 57.01%, the highest since January 2018, and higher above the recent average of 48.24%. And with Directs taking down 15.93%, below the recent average of 21%, meant Dealers were left holding 27.1% of the auction. The question is how much of this was bought by liquidity-challenged dealers, and will be quickly repoed back to the Fed in the coming days.