With no pressure in the repo market anywhere along the curve, there was little probability of a “surprise” squeeze into today’s 2Y auction, and predictably, today’s sale of 2 Year paper closed with a wide tail, printing at 1.21%, some 0.6bps wide of the When Issued 1.204%, which in turn was also well outside of the 1.176% yield the 2Y was trading at just ahead of the auction. This was below the 1.27% in December, but above the 1.085% in November and 0.92% 6 month average.
On the flipside, the internals were decidedly better with the Bid to Cover of 2.68 rising materially from December’s 2.436, and just better than the 2.62 6 month average.
Finally, after a foreign buyer strike over the past 6 months which saw Indirect bidders under 40% and even under 30% in July and August, foreign central banks were back, taking down 48.8% of the auction, compared to just 32.7% last month and 33% on average in the prior 6 auctions. With directs taking down 9.3% this means that Dealer were left holding 41.2% of the auction, the lowest takedown by primary dealers since May 2016.
Overall, while nothing to write home about, today’s auction was stronger than the “tailing” headline would suggest.
via http://ift.tt/2jO5SMg Tyler Durden