Treasury just sold $13 billion 30-year notes. Today's long bond auction was one of the strongest in several years.

The bid to cover ratio, a measure of auction demand, was a stellar  3.02 bids submitted for every 1 accepted by Treasury. This is the highest bid to cover ratio we have on record.  45.5 % of the issue was awarded at the  high-yield of 4.569 %, which was nearly 3 bps below the 1pm "When Issued" yield. That is an indication of  aggressive demand. (AQ said accounts are "peeling off steepeners").

Directs took down 6.4 % of the competitive bid and 21.2 % of what they tendered.  Both metrics were notably below average.

Indirect accounts  were awarded 40.7 % of the competitive bid and 47.6 % of what they tendered.  The overall award is just slightly better than both 5 and 10-auction averagesbut the hit rate is low...indicating indirect accounts were specific about the yields they required. Based on strong demand stats, it appears they were outbid by another account. 

And then there's dealers. They bid well enough to add $6.88 billion in reopened 10-inventory. This totals 52.9% of the competitive bid and 28.3 % of what they bid on.  So here's where we see the heavy lifting was done. This is an above average award % for dealers. The street was heavy on the tender as well. Dealers bid on $24.3bn in inventory! Compare that to $21.8bn at the January reopening 10-yr TSY note auction.

Plain and Simple: VERY STRONG AUCTION. Thanks to primary dealers. We think dealers wanted this issue. We think they bid aggressively to get it. They need the inventory. "Peeling off a steepener".

HOW TREASURY AUCTIONS WORK

Market Reaction...

After meeting resistance at 3.42, 10 yr yields shot lower to test 3.40.

 The yield curve is flattening as we'd mentioned would coincide a favorable reaction to the auction. 

FNCL 4.5's haven't moved as much as benchmarks and have not yet been able to trade above their morning highs. 

REPRICES POSSIBLE.