On one hand today’s 2 Year bond auction priced, as expected, at the widest level since April 2011, or 0.589%, on rising concerns that the Fed may, all economic signs to the contrary, raise rates in the coming year.
On the other hand, this was arguably the strongest 2 Year auction at this yield, in all of 2014. First, the auction stopped through a substantial 0.6bps through the 0.595% When Issued. Then, the Bid to Cover was a solid 3.564, the second highest of 2014, only lower than February’s 3.605. Finally, the internals also were very solid, with Directs taking down 16.11% and Indirects holding 40.91%, the most since March 2014, leaving only 42.98% to the Dealers, which was also the lowest since March.
A trend has emerged: the higher that yield, the more the demand, which is what one would expect in a world without endless Fed manipulation and central-planning. Could we be getting some hints of normalization? And how soon until yields resume their downward path as the current rate hike scare blows off yet agaian?
via Zero Hedge http://ift.tt/1x8qSjB Tyler Durden