The US treasury will auction off $21 billion of 30-year bonds at the top of the hour. The auction completes the coupon auctions for the week. The three-year note auction was met with above-average demand (I gave it a grade of B). The 10 year note auction yesterday was met with average demand (a solid C).
The last month’s auction results and the six-month averages are outlined below. The auction’s success or failure depends upon the actual results versus the six-month average. Most buyers in US auctions are from international investors. At the last auction last month, 68.5% of the 30 year bonds went to that sector, above the six-month average of 65.8%. The Tail which compares the WI (when-issued) level to the actual high yield level came in at -0.3 basis points which is indicative of strong demand (the average is +2.2 basis points):
- High Yield: Previous was 4.344%, with a six-auction average of 4.399%.
- Tail: Previous was -0.3 basis points, six-auction average is 2.2 basis points.
- Bid-to-Cover Ratio: Previous ratio was 2.43x, six-auction average stands at 2.39x.
- Dealers’ Participation: Previous was 14.2%, six-auction average slightly higher at 16.0%.
- Direct Bidders (a measure of domestic demand): Previously at 17.3%, close to the six-auction average of 18.1%.
- Indirect Bidders (a measure of international demand): Previously at 68.5%, with a six-auction average of 65.8%.