The Treasury Department just auctioned off a record $42 billion 2 yr notes (second auction at this amount). 92% was awarded at the high yield of 1.119%.
This is a 1.2 basis point tail as the "When Issued" 2 yr note was trading at 1.107% at 1pm. The bid to cover ratio, a measure of demand, was 2.68% vs. the 2.90% average of the last four auctions. Indirects took 49.4% vs. the 46.2% recent average while dealers were awarded 47.1% vs. the 50% average of the previous four auctions.
Dealers took home 24% of what they bid on, lower than 30% average, and indirect bidders were awarded 73% of what they bid on....higher than 67% four auction average.
The bond market was a bit indecisive following the release of the results, however as the dust settled the 10 yr note has rallied while stocks have retraced a portion of their intraday gains.
The rate sheet influential FN 4.5 MBS coupon is trading near the highs of the day. If prices approach 100-10 you may be awarded a reprice for the better...but dont get your hopes up...our old friend MR.PARNERTIA (Negative Convexity) isnt likely to allow any gains to last for long (unless TSYs keep on rallying)...
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