Following the surprising swoon in the Treasury complex which overnight slid lower following the German Bunds lower, only to rebound after Naimi sent oil sliding, it was not clear how big demand would be for today's $26 billion auction in 2 Year paper. Moments ago we got the answer, and it was "solid", with the high yield printing at 0.752%, pricing through the 0.763% When Issued by 1.1 bps, and the lowest yield since September 2015.
The internals were in line with the Bid To Cover of 2.91, fractionally higher than last month's 2.90, if still modestly below the TTM average of 3.22.
However, it was the demand by Indirects that showcased the strength of today's auction because at 55.6%, this was just a modestly lower takedown by foreign official entities from the January Indirect bid which came at 57.9%, and thus was the second highest indirect demand going all the way back to June 2009. Directs ended up with 10.8% of the paper, leaving just 33.4% to Dealers.
In short, a very strong auction and confirmation that while China may have sold the belly of the curve and onward overnight, there remains strong demand for the short end, if not ultra short end because as we explained last night, foreign central banks prefer to park their cash with the Fed's reverse repo facility where they pick 0.35%, about 10 bps higher than comparable Bills.