First 10 Year Auction Of The Decade Is A Tailing Clunker

After a poorly accepted 3Y auction to start the new decade’s issuance of coupon paper, moments ago the US Treasury sold $24BN in 10Y notes (CUSIP YS3) which was a tailing clunker which priced at a high yield of 1.869%, the highest since July 2019, up from December’s 1.842%, and tailing the When Issued 1.853% by 1.6bps, the biggest tail since August.

The internals were somewhat better, with the bid to cover rising fractionally from 2.43 in Dec to 2.45, and also above the six auction average of 2.40. The buyside bid was also on the weaker side, with Indirects taking down 55.2%, below the 56.1% in December and below the 59.7% six auction average. And with Directs taking down 16.1%, below the 19.4% from last month if above the 13.9% recent average, Dealers were left with 28.7% of the takedown, although by the time the year is over they will likely be selling this back to the Fed which will soon have to expand its “NOT QE” beyond Bills and to Coupon securities.

Overall, the first two auctions of the year have left a bitter taste in investors’ mouths, and one wonders if this is a harbinger of primary market demand for the rest of the year ande decade.