Preview 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