Launching this week's Treasury issuance of 3, 10 and 30Y paper, this afternoon's 3-year note auction results was "stellar", as Stone McCarthy put it.
The auction stopped 0.9 bps through the 1.529% When Issued, printing at 1.520% - the third consecutive "stopping through" auction in a row - with the highest bid/cover in more than a year and a half, as 3.13 bids tendered for every dollar, the highest since December 2015, far above the 2.80 6 month average. There were $75.1BN bids for $24BN in notes sold (ex-SOMA).
The internals were also impressive, with foreign buyers, or Indirects, awarded 64.1%, above last month's 52.6% and above the 6MMA of 54.6%. The $20.960 billion Indirect bid today was far above the $15.229 billion average of the prior six months. In fact, outside of the $22.296 billion bid in June, it was the largest since January 2012. The hit ration was good for a bid of that size, boosting the Indirect takedown to 64.5% which is well above the 54.6% average of the prior six months. That is the third largest Indirect takedown on record, behind only the 65.6% takedown two months ago and the record 68.5% takedown in November 2009.
Directs took down 10.2%, also above the 6 month average of 8.37. The $3.969 billion size of the bid compares to an average of $3.681 billion over the prior six months, and the 61.1% hit ratio was strong. The combination pushed the Direct bidder takedown to 10.2% of the auction today, which is the largest since July 2016. Direct bidders had takedown down an average of 8.4% of the auctions over the past six months.
The 74.2% combined buyside takedown was the second largest on record, behind only the 76.1% takedown at the November 2009 auction.
Even the Dealer bid - which was left with 25.8% of the final allotment, the second lowest in history - was much improved this month. The $50.058 billion size of the bid compares to an average of $48.055 billion over the past six months. The strength of the buyside bid meant that dealers largely missed on those bids though, leaving them with only 25.8% of the auction today. As the mirror of the buyside, that is the third smallest Dealer takedown on record.
Overall, another strong auction on the short-end of the curve, suggesting that there may have been an outsized element of short covering following today's much more hawkish then expected JOLTS report which sent the USD surging, and prompted speculation about a faster than expected tightening by the Fed.