Treasury Concludes Weekly Treasury Sales With Strong, Stopping-Through 30Y Auction


Following a spectacular 3Y auction, and a strongish sale of 10Y paper on Monday, today the Treasury promptly concluded its weekly sale of Treasurys today ahead of the Fed’s 2-day meeting tomorrow, when it sold $12 billion in 30Y paper in a solid auction, with a high yield of 2.87%, stopping through the When Issued of 2.873, by 0.3bps, the first non-tailing 30Y auction since February. The stop out on today’s auction was the lowest since October’s 2.47%, which is somewhat surprising coming ahead of tomorrow’s 25 bps rate hike, which traders seem to expect will push yields lower not higher in a further flattening of the yield curve.

The internals were solid, with the bid to cover rising from 2.191 in May to 2.32 in June. Total bids amounted to $27.8bn for $12.0bn in bonds sold vs $37.8b in bids for $20.0bn in bonds sold at the previous auction.

Indirect bidders were awarded 63.7% vs previous auction’s 59.1%, and just above the 6 month average of 63.6%. Direct ended up with with 6.7% of the allotment vs 5.3% in the previous auction, while Dealers were left holding 29.6% vs last auction’s 35.6%: numbers which largely were in line with recent expectations.

Following the week’s auctions, one can conclude that few buyers, among them primarily foreign central banks, are too worried about a sharp blow out in yields as a result of Yellen’s announcement tomorrow, suggesting that just like stocks, bonds also expect a “dovish hike.”