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Treasury Sells $36BN in 3 Year Paper In Weak, Tailing Auction

Summary:
For the first time in a while, bond traders were carefully following today's Treasury coupon auctions, with the US Treasury selling a two-fer of 3 and 10 year paper, to see how easily the market would be able to digest today's supply. Moments ago the first auction, the sale of BN in 3-year paper priced, ...

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For the first time in a while, bond traders were carefully following today's Treasury coupon auctions, with the US Treasury selling a two-fer of 3 and 10 year paper, to see how easily the market would be able to digest today's supply.

Moments ago the first auction, the sale of $36BN in 3-year paper priced, and while there were some negative aspects, it could have been worse.

The auction stopped at 2.989%, the highest since May 2007, tailed the 2.987% When Issued by 0.2bps. This was the 7th consecutive tailing 3Y auction, indicating that the market appears to have a bit of a grudge when it comes to this particular tenor.

Another disappointing metric - the Bid to Cover of 2.56 - dipped from last month's 2.68, and was below the 2.71 6 auction average.

The internals were somewhat better, with Indirects taking down 46.9%, modestly above last month's 46.3% if below the 47.5% average. Directs took down 9.8%, down from 10.7% in September and below the 10.6 six auction average, leaving dealers with 43.3% of the takedown, in line with last month's 43.0% and above the 41.7 average.

Overall, a somewhat disappointing auction, but hardly as bad as it could have been had foreign buyers stepped away as some had feared.

Treasury Sells $36BN in 3 Year Paper In Weak, Tailing Auction

And now we turn our attention to today's more important 10Y auction at 1pm, which will have a far greater impact on both the yield curve and the bond market in general.

 

Tyler Durden
Tyler Durden (a pseudonym) represents the idea that a return to truly efficient markets is a possibility and a necessity. After having experienced the inner workings of capitalism at various asset managers and advisors, Tyler believes that the current model is flawed and a deleveraging at every level of modern society is needed to reinspire the fundamental entrepreneurial spirit. Visit his blog: ZeroHedge (http://www.zerohedge.com/)

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