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Free AccessPreview 2Y Note Auction: Historic Concession
The Treasury comes to market shortly (1130ET) to sell $50B of 2Y Note - the first of two benchmark auctions today (5Y is up at 1300ET).
- The 2s sale comes with the short end under pressure amid speculation of faster and more aggressive Fed rate tightening.
- The last 2Y auction was on Feb 22, $52B: decent sale with a small stop through (1.553% high yield vs. 1.57% WI; 2.64x bid-to-cover vs a 5-auction avg of 2.56x).
- To call the move in yields a "concession" vs the previous auction would be an understatement, with a current bid yield of 2.31% (albeit down from above cycle highs above 2.40% intraday) representing a 65+bp discount vs last month's offering. The trailing 5-auction average high yield is a mere 0.88%.
- It will be interesting to see whether this augurs well for demand. BMO points out that this is the biggest rise in yields on an auction-vs-auction basis on record, "and this fact should translate to a solid dip buying backdrop".
- 2s5s are only a little flatter vs a month ago (21bp vs 32bp), but bear flattening is very much evident further out (2s10s at 11bp vs 38bp).
High yield When-issued yield Trade through (tail) High - Median Spread Bid-to-cover Primary Dealer Percent Indirect Percent Direct Percent Offering Amount 5-Auction Avg 0.88% 0.89% 0.2 4.3 2.61 24.25% 59.35% 16.40% 56 22-Feb-22 1.55% 1.57% 1.7 4.3 2.64 15.65% 65.58% 18.77% 52 24-Jan-22 0.99% 1.00% 1.2 4 2.81 24.61% 66.00% 9.39% 54 27-Dec-21 0.77% 0.76% -0.7 4.4 2.55 24.22% 61.39% 14.39% 56 22-Nov-21 0.62% 0.61% -1.3 4.8 2.36 37.21% 45.62% 17.17% 58 26-Oct-21 0.48% 0.48% 0.1 4.1 2.69 19.55% 58.14% 22.30% 60
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Why MNI
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