Home Demand Solid Demand In 2Y Treasury Auction Despite 2 Year Low Yield

Solid Demand In 2Y Treasury Auction Despite 2 Year Low Yield


The 2Y Treasury yield may be higher than every other Treasury maturity except for the 30Y (with the 2s10s inverted by almost 5bps), but that doesn’t mean that there was a shortage of demand for today’s 2Y auction, in which the Treasury sold $40 billion in two-year paper.

The auction stopped at a high yield of 1.516%, which tailed the When Issued fractionally, by just 0.1bp; this was the lowest 2Y auction yield since September 2017, and sharply lower from July’s 1.823%.

Despite the sharp drop in yield, the internals were quite solid, with the Bid to Cover rising from 2.50 to 2.60, above the six-auction average of 2.57. More importantly, foreign buyers were present unlike July, with the Indirect bid jumping from 43.5% to 47.1%, also above the recent average of 46.8%. And with Directs taking down 20.4%, roughly in line the recent average, that left Dealers holding 32.5%.

Overall, a solid auction which took place just as the 10Y yield dropped to session lows of 1.47%, and which had no impact on the curve due to what appeared to be substantial demand even as yields continue to slide.

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