Solid 3 Year Auction Prices At Lowest Yield Since April

The recent scare that investors may be slowly (or not so slowly) waning in the primary market for US Treasurys is rapidly becoming a distant memory, and after yesterday’s 3 Month bills pricing at 0.000% for the first time ever, today’s strong 3 Year auction should end any debate, if only for the time being, about interest in US paper.

Pricing at a high yield 0.895%, today’s 3 Year bond price 0.6 bps through the 0.901% When Issued (one hopes auctions are no longer being rigged by the Primary Dealers). This was the lowest yield on the 3 Year paper since April’s 0.865%, and a substantial drop from the 1.056% last month. The Bid to Cover of 3.138 was slightly weaker than last month’s 3.233 and below the TTM average of 3.291.

Indirects ended up holding 47.7% of the auction, precisely on top of the 1 year moving average, if slightly below September’s 51.0% and on par with the lowest allocation to foreign central banks since January. Dealers held 41.1%, the same as last month. This meant Directs ended up with 11.1% of the final allocation, the highest since July.

Altogether a solid auction for those wishing to telegraph that the Fed’s rate hike plans are very unlikely to be ever validated. In fact, if anything, the recent trades in the bond market suggest that just like stocks, bonds are now eagerly looking forward to Yellen unleashing QE4.