Wednesday, May 12, 2010

10 Yr Treasury Note is Still in Demand

Here is a summary from Bloomberg following today's ten year note auction. For some longer historical perspective, see an earlier post about the 10 yr Note. Briefly, yield has fallen from 3.90% in the April auction when the bid-to-cover ratio was a nine year record high 3.72. This month shows a ratio of 2.96 indicating less enthusiasm for the Note, but still historically strong.

Bidding was aggressive for the month's 10-year note auction, an oversize $24 billion offering where coverage came in at a solid 2.96. Dealers are definitely losing business as direct bidding was very aggressive at 25 percent. Indirect bidding was also firm, at 42 percent, making for a combined 67 percent non-dealer takedown and far above the 52 percent average.

High yield of 3.548 percent was right at the 1:00 bid. A look back at the high yield in last month's auction offers a key yardstick for the sovereign-risk effect. The April yield was more than 35 basis points higher than now, this during a time when U.S. economic data have strengthened! Tomorrow the Treasury auctions $16 billion of 30-year bonds.