Preview: $38B 10Y Note Auction

The Treasury re-opens 10Y note (91282CCB5) Wednesday for $38B.

• Background: Would-be bidders hoping for a concession going into the auction will have been disappointed by yields falling to multi-week lows well below 1.50%, with only the May 7 intraday drop (1.4643% low) standing in the way of a 3-month yield low. That's a long way from the 1.7742% range high (Mar 30). It's a similar story with the curve: 2s10s have flattened since hitting 160.8bp at end-March, falling to 133.4bp last.
• This is occurring ahead of some potentially key market-moving events: May CPI Thursday and FOMC next Weds; ECB Thursday also on the mind.
• Auction history: The last auction on May 12 (initial issue, $42B size) was strong, seeing stop through of 1.3bps on 1.684% high yield and a 2.45x bid-cover (highest since October 2020).
• Good participation also, with unusually low primary dealer takeup (19.5%, vs previous 4-auction average of 22.5%) and high indirects (63.3%, vs 59.8% avg).
• That was after a huge upside miss in CPI data backed 10Y yields up 7bps intraday. The strong May 12 result helped flatter the 5-auction trade-through average of 0.3bp (ie small avg stop through); the prior two auctions tailed slightly.
• Timing: Results available shortly after competitive auction closes at 1300ET.

Last 5 10Y Auctions Average: