Lousy, Tailing 2Y Auction Sees Fewest Foreign Buyers Since March

In the first of the day’s two auctions courtesy of a truncated issuance schedule, moments ago the US Treasury sold $54BN in 2Y paper (5Y auction to follow in a few hours), in what was a lousy auction.

The high yield of 4.887% was down from last month’s 5.055% and the lowest since July’s 4.823%, however the auction tailed the When Issued 4.876% by 1.1 bps, the first tail since July and followed two “on the screws” auctions in September and October.

The bid to cover of 2.54 was below last month’s 2.64 and was the lowest since March 2023 and clearly far below the six-auction average of 2.81%.

The internals were even uglier, with Indirects (foreign buyers) sliding to just 57.4%, down from 62.1% in October and the lowest since March (and far below the recent average of 65.7%). And with Directs awarded 23.4% (the highest since March), Dealers were left holding 18.8%, of the auction, the highest since April.

Overall, this was a lousy, tailing auction where foreign buyers continued to pull back, forcing both directs and dealers to pick up the slack.

What is surprising is that whereas a less ugly TIPS auction last week sent yields spiking, today there has been virtually no adverse market reaction to what was unquestionably an ugly 2Y sale.