Another Treasury Auction Sees Weak Demand Led by Indirect Bidders
Thursday’s $25 billion 30-year bond auction tailed, meaning it sold at a higher yield than the market expected, as demand from indirect bidders (which include foreign buyers) fell below its six-month average. That follows tails at Tuesday’s 10-year and Monday’s 3-year auctions, which also saw weak indirect demand. It’s the first time since May that all three of these auctions tailed.
Indirect bidders took 68.1%, the lowest since August, down from 72.3% in October and below the six-month average of 70.5%. The indirect share fell at all three auctions this week. Direct bidders took 20.5%, little changed from 20.9% in October and close to the six-month average of 20.0%. That left dealers, who take whatever other bidders don’t, with 11.4%, the most since August. That’s up from 6.8% in October and compares with a six-month average of 9.5%.
The bid-to-cover ratio measures how many dollars were bid for each dollar of bonds sold. It fell to 2.36, the lowest since June, from 2.54 in October, against a six-month average of 2.44.
The bonds sold at a high yield of 5.441%, 0.4 basis point above the 5.437% when-issued yield just before the 1 p.m. ET bid deadline, according to investingLive and ZeroHedge. It was the second straight tail and the biggest since June; August’s was also 0.4 basis point. The six-month average is a 0.1 basis point stop-through, meaning an auction sells below the expected yield. The high yield was down from October’s 5.618%, which was the highest since August 1999, but it was still the second-highest since 2001. The six-month average is 5.211%. The new bonds carry a 5.375% coupon, the highest since February 2001, according to Treasury data.
ZeroHedge said the auction “was not pretty… at all,” though “not as ugly as Tuesday’s terrible 10Y auction.”