Record Low Dealers In Stellar, Stopping Through 3Y Treasury Auction

In the week’s first refunding auction, moments ago the Treasury sold $42 billion in 3 year paper in a strong auction.

The high yield of 3.202% was above last month’s 3.093% and the highest since 2007; it also stopped through the When Issued 3.205% by 0.3bps, just below last month’s stop through of 0.5bps.

The bid to cover of 2.501 was the highest since May’s 2.595 and above the 6-auction average of 2.467.

The internals were also solid with Indirects awarded 63.1% of the auction, the highest since February, and obviously well above the six-auction average of 58.5. And with Directs awarded just 17.3%, or the lowest since February, it meant that Dealers were left holding to 19.6% of the auction, the lowest on record, and to be expected at a time when the Fed is not only no longer buying bonds via QE but is actively unwinding its balance sheet.

Overall this was a solid start to the TSY’s refunding auctions week, and while the 3Y yield was a new post-Lehman high, expect to see both the 10Y and 30Y later this week continue to sink lower.