The Treasury has just successfully auctioned $40 billion 2 yr notes...this issue was met with strong demand.
Demand as measured by Bid-to-Cover Ratio: 3.214 bids for everyone 1 accepted
The high yield was 1.151%. That's 3 bps "through the screens"...meaning the high yield was 3 basis points lower than where the yield of the "on the run" 2 yr note was trading prior to the auction. That's good!
As expected (and needed) Indirect bidders took home a majority of the issuance...69%. Primary Dealers were awarded 27%
Here's how today's 2 yr note auction shapes up against past issuances....
YAY RIGHT?
Not really..the long end of the yield curve and "rate sheet influential" MBS coupons didnt really react to the strong auction. The FN 5.0 ticked up from 101-06 to 101-11 before falling back to 101-04. Why?
Because our directional guidance giver ran into several strong resistance points at 3.63%...
3.68 should moderate on the downside for the 10 yr...which will help stabilize "rate sheet influential" bids. This implies we remain range bound until the end of the FOMC meeting...which will likely allow lenders to go into "status quo" mode on rate sheets over the next 24 hours.
MBS Market Alerts
