The when-issued market was trading 2yr notes around .773 at the time of the 1pm auction.  That means at a high yield of .74, the auction "traded through" to the tune of 3.3 bps.  Interestingly enough, the last time the auction result was this much better than WI yields was in June of 09, at the first 2 year auction after the massive sell-off surrounding Black Wednesday, when it was ALSO EXACTLY 3.30...  (bid wanted marketplaces)

The bid-to-cover ratio came in on the high side as well at 3.71.  Last 4 auctions have averaged 3.55.  But theres also the buyer make-up metrics of the auction, they were weak, such as the 23.4% indirect bid and the 57% award to dealers. We hope that a good portion of that can be chalked up to London being out today and Tokyo being out early as well as hedge funds being snowed in.  Combine that with the low volume overall on this "eye of the holiday storm" week and we're reasonably assuaged, though waiting for next month's auction results as more representative of outright investor demand.

Bonds across the curve and stocks have responded favorably with both MBS and Treasuries well on their way to the best levels of the day.  Here's a look at the charts:

Note the improvements in both stocks and bonds following the auction.  This AM's low yields could provide some resistance to further gains, but the more pertitent technical levels are around 3.37 range.  Whatever the case, reprices for the better are likely.