Record Treasury Supply Sees Mediocre Demand For 2Y Auction As Yield Jumps

Having sold $96BN in 3 and 6-Month bills earlier today, the Treasury also sold another $30BN in 2Y Notes, bringing the total sold for the day to $126BN, and almost hitting the midpoint of this week’s record $294BN in Treasury issuance.

And, contrary to speculation by various commentators that there may not be enough demand for today’s issue, the 2Y auction priced without much difficulty. and aside for a modest 0.4bps tail, the issue was quite unremarkable with several metrics performing better than in February. Of note, the auction size of $30 billion stepped up from February’s 28 billion and more than the $26 billion in January, and was the most since June 2014.

The High Yield of 2.310% was higher than February’s 2.256% and tailed the 2.306% When Issued by 0.4bps. This was also the highest yield since August 2008.

The internals were stronger, with the bid to cover unexpectedly rebounding from 2.72 last month to 2.91 today, above the 6 month average of 2.80, even as Indirects pulled back modestly from 46.3% to 44.5%, while Directs took down 14.1%, above February’s 13.4%; Dealers were left with 41.3% of the award, above the 37.9% 6 month average award.

Overall, a slightly better than mediocre auction, as the market refuses to choke on the record supply of paper created by the US government.