Buyers Willing to Bid on 10s But Only at Cheaper Prices. Modest Rebound in Process

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Posted To: MBS Commentary

Treasury just auctioned $21 billion reopened 2.625 coupon bearing 10 year notes. The bid to cover ratio, a measure of auction demand, was 2.92 bids submitted for every 1 accepted by Treasury. This is below both the five and ten auction averages (3.03 & 3.12) which is indicative of apathetic demand. The high yield was 3.34% but only 8.71% of the issue was allotted there. The 1pm WI yield was 3.333%, so this auction tailed by less than a bp which implies buyers forced Treasury to lower their offer prices. It should be noted that the "on the run" 10yr note yield and the WI both moved sharply higher into the 1pm auction stop. This illustrates the market's pre-auction concessionary efforts.The fact that we still tailed implies investors did their best to make Treasury come to their declining...(read more)

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