- 2yr Treasury Auction
- 1 full bp lower than expected (2.125% vs 2.225%)
- Bid to cover: 2.75x vs 2.52x avg
- Direct bidders took 27.2 vs 16.4% avg (highest since 2013)
- Dealers took 26.2% vs 36.1% avg
It's tremendously uncommon for a 2yr Treasury auction to have a visible impact on trading in longer-dated Treasuries like the 10yr, but today is an exception.
Bonds were already much stronger overnight as Treasuries caught up to 2 days worth (Monday and Tuesday's overnight session) of European bond market gains. 2.28% had offered some resistance as a floor during the first few hours of domestic trading.
Following the auction, 10yr yields broke all the way down to 2.264%, but have since edged slightly higher to 2.269%. MBS are participating in the rally, but not on the same level as Treasuries. Fannie 3.0 coupons are up 6 ticks (.19) on the day at 99-24 (99.75).
