Ugly, Tailing 10Y Auction Blows Out Yields, Sends Stocks Higher
It wasn't the lowest yield on record for a 10Y auction, but it was close.
Stopping at a high yield of 1.67%, today's 10Y auction was unexpectedly ugly - which perhaps was to be expected in a day when yields plunged around the globe - stopping through the 1.653% by 1.7bps, one of the biggest tails on record and the 4th consecutive tail in a row. It was also the lowest yield for a benchmark auction going back to August 2016, and was not too far away from the lowest 10Y auction yield on record which was recorded in July 2012 at 1.459.
The internals were just as ugly, with the Bid to Cover sliding to 2.20 from 2.41, well below the 6 auction average, and the lowest since May. Meanwhile, foreign demand while hardly catastrophic was lower than in recent months, dropping from 60.8% in July to 55.7%, and below the 62.8% six auction average. This left Directs holding 13.6% and Dealers with 30.7%.
The big tail in the auction promptly repriced the bond market sending the 10Y from 1.62% to above 1.66%.
Finally for those asking why stocks jumped after the ugly auction pushed yields higher, and why are equities correlating to yields, the answer is simple: math PhDs are in charge.
No comments:
Post a Comment