The US Treasury just sold $39 billion in 10-year notes, and investors practically tripped over each other to buy them. The September 9 auction posted a bid-to-cover ratio of 2.71, meaning there were $2.71 in bids for every $1 of debt on offer. That’s the highest reading since April 2016.
The auction cleared at a high yield of 4.834%, a level the 10-year hasn’t touched since August 2007.
The numbers behind the blowout
Indirect bidders, a category that includes foreign central banks and international institutional investors, gobbled up 79.2% of the offering. Primary dealers took home just 4.3% of the total. When dealers get stuck with a small allocation, it’s a sign that real buyers wanted in. A high dealer takedown usually means weak demand. A 4.3% reading means the opposite.
The auction also “stopped through” the when-issued yield by 1.5 basis points. In plain terms, the final clearing yield came in lower than where the bonds had been trading in the secondary market right before the auction.
