The Treasury Department successfully auctioned off $35bn 3 year notes at 1pm. Weakness in the stock market and other market factors like investors setting up for the remaining auctions of the week were supportive of the bid (the UK government guarantee of RBS deal have anything to do with it?)

The demand, as measured by the bid to cover ratio, was 2.66%, higher than the previous two auctions and above the 2009 auction average of 2.39%.

Primary Dealers took home about 56% of the offering which is less than average based on the past six auctions.

Indirect bidders (considered to be foriegn central banks) bought 37% of the total auction, which is higher than the 32% average they were awarded for the previous ten 3 year note auctions.

The Fed(SOMA) bought up $6.2bn and is scheduled to buy up more notes tomorrow...the highest amount they have purchased in the open market thus far is $8.5bn in one day (yesterday).

Here is a snapshot of the previous seventeen 3yr Treasury Note Auctions....

The Dow moved a few points higher following the auction, but has since begun testing its 8372 intrday low. Look for it to bounce/go sideways at this short term technical/psychological support level

The yield curve moved slightly flatter as measured by 2s vs. 10s which fell from 221bps to 219bps. The 2 yr note barely budged and the 10 yr note fell from 3.20 to 3.17. Looks like traders are getting ahead of the 10 yr auction tomorrow...not getting excited because profit takers will continue to...take profits....into any strength.

As for MBS...still a yawner. Not much reaction...the trading environment is still quite sluggish. WE ARE OFFICIALLY RANGE BOUND!!!

Since 5pm "Going Out"  Marks....

FN30________________________________

FN 4.0 -------->>>> +0-04  to 100-05  from 100-01

FN 4.5 -------->>>> +0-05  to 101-29  from 101-24

FN 5.0 -------->>>> +0-03  to 102-27  from 102-24

FN 5.5 -------->>>> +0-02  to 103-19  from 103-17

FN 6.0 -------->>>> +0-03  to 104-20  from 104-17

GN30________________________________ 

GN 4.0 -------->>>> +0-05  to 100-08    from 100-03

GN 4.5 -------->>>> +0-05  to 102-04  from 101-31

GN 5.0 -------->>>> +0-04  to 103-15  from 103-11

GN 5.5 -------->>>> +0-03  to 103-28  from 103-25

GN 6.0 -------->>>> +0-03  to 104-14  from 104-11

WE THINK THE LOOMING CINCO DE MAYO CELEBRATIONS ARE DISTRACTING THE MARKET.....are they distracting you?