Treasury Curve Flattens After Strong, Stopping Through 30Y Auction

After a mediocre 3Y, and a strong 10Y auction in the last two days, the Treasury concluded its refunding on the right foot – if with some blemishes – selling $15 billion in 30Y bonds at a 2.801% yield, stopping through the WI 2.802% by the smallest possible margin, and below last month’s 2.870%.

There was some weakness in the bid-to-cover which dipped to 2.23 from the previous auction’s 2.53, and below the 6 month average 2.312%. Total bids of $35.2 billion competed for $16.8b in bonds incl. $1.8 billion in SOMA, vs $30.4b in bids for $12.0b in bonds sold in the October auction.

Indirect bidders were awarded 61.8%, in line with October’s 62.8% and the 6 auction average of 61.2%. The award to directs dropped to 6.4% vs previous auction’s 10.6%, if not far off the average 6.9%, leaving dealers taking down 31.8%, above October’s 26.6%, and right on top of the recent 31.0% average.

As Bloomberg commented, the “auction was expected to benefit from demand for duration that has pushed 5s30s curve to multi-year lows, favorable supply trends and short positioning by speculators in futures; while cheaper outright and on curve Thursday, sector has richened notably over past month.”