Strong 3 Year Auction Surprises Bond Watchers As Shorts Rush To Cover

Jon Alternative Media, Blogosphere, Economy, Fiscal Policies

With the Fed’s first rate hike in nearly a decade set to take place next Wednesday, and a move up from the lower bound precisely 7 years after the Fed cut rates to zero for the first time, there was some trepidation that today’s 3 Year auction could turn nasty. That did not happen, and instead the Treasury managed to sell $24 billion in 3 year paper on quite reasonable terms, with the high yield printing at 1.255%, stopping through the When Issued by 0.9 bps.
The internals were also solid, with the Bid to Cover rising from last month’s 2.824 to a respectable 3.14, while the Primary Dealer take down of just 34% was the lowest since May of 2010. The other demand came from Indirects who accounted for 47.4% of the final placement, fractionally below the TTM average of 48.4%, while Direct demand surged from 15.1% to 18.6%, well above the TTM average of 10.7% and the highest since September of 2014.

This post was published at Zero Hedge on 12/08/2015.