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2Y Auction Tails As Yield Tumbles To 29 Month Low, 2s10s Flattening Accelerates

2Y Auction Tails As Yield Tumbles To 29 Month Low, 2s10s Flattening Accelerates

After today's sharp drop in yields across the curve, and certainly on the short end, where the 2Y yield dropped from Friday's 1.50 close to as low as 1.4264%...

... today's 2Y auction would probably not present any bargains, and sure enough, moments ago the Treasury announced that today's auction of $40BN in 2Y notes was hardly a blockbuster affair, pricing at 1.440%, tailing the When Issued 1.439% by 0.1bps, the first 2Y auction tail since August, and the lowest 2Y auction yield going back to August 2017.

That is not to say that demand was poor: on the contrary - after the BId to Cover tumbled to 2.305 in December, the lowest since 2009, in January the BTC rebounded strongly to 2.65, the highest since October,

The internals were also solid, with Indirects taking down 49.1%, and with Directs allotted 20.75%, it meant that Dealers were left with 30.2%, below last month's 32.25%, but just above the six auction average of 29.62%.

Overall, a good - if not great - auction to start off a week with $140BN in paper on offer.

And while the 2Y auction was uneventful, the real action is in the curve, where the 2s10s has just collapsed below 16bps, more than 50% below the Jan 1 highs, and the tightest since the start of December, undoing all the recent "global recovery" optimism.

 

Tyler Durden Mon, 01/27/2020 - 11:48

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