Unexpectedly Ugly, Record Large 2Y Auction Prices At New All Time Low Yield

As part of this week’s abbreviated auction schedule, moments ago in its first of two auctions scheduled for Monday, the Treasury sold a record $48 billion in 2Y paper, the biggest auction size for that maturity on record.

And despite the record low yield, the auction was quite ugly as buyers clearly demanded a concession at these record low yields.

While the auction stopped at a high yield of 0.155%, which was well below last month’s 0.193% and the lowest 2Y auction yield on record, it tailed the 0.146% When Issued by almost 1 basis point.

The Bid to Cover was also ugly, sliding to just 2.340, a far cry from the 3.102 in April, and the lowest going to December 2018.

Finally, the internals were just as ugly, with the Indirects tumbling to 45.84%, far below the 52.0% in June and the 51.9% six auction average; in fact, it was the lowest Indirect takedown since last July. And with Directs taking 14.8%, or just in line with the recent average, Dealers were left with 39.3%, the highest since February (although it’s just a matter of time before they flip it back to the Fed).

Overall, a surprisingly ugly auction, and one which has put a bad taste in buyers’ mouths ahead of today’s $49BN 5Y auction.