US treasury auctions off $69 billion of two-year notes 3.955% ...Middle East

High yield 3.955%WI level at the time of the auction 3.965%.Tail -1.0 basis points versus six-month average of -0.4 basis points.Bid to cover 2.57X vs average of 2.65XDirects 26.2% versus six-month average of 16.4% Indirects 63.3% versus six-month average of 72.7%Dealers 10.5% versus six-month average of 10.9%

Positive Factors:

High Yield vs. WI (When-Issued): The high yield came in 3.955%, which is 1.0 basis point better than the WI level of 3.965%. That’s a negative tail (i.e., the yield was lower than expected), and better than the 6-month average tail of -0.4 bps. ✅ Positive signal of stronger-than-expected demand.

Direct Bidders: Awarded 26.2%, significantly above the six-month average of 16.4%. ✅ Shows strong appetite from domestic buyers, often viewed as “real money” participants.

Neutral to Slightly Negative Factors:

Bid-to-Cover Ratio: Came in at 2.57x, below the 6-month average of 2.65x. ❌ Suggests slightly weaker overall demand in terms of total bids per amount offered.

Indirect Bidders (Foreign/Central Banks): Awarded 63.3%, lower than the 72.7% average. ❌ Could point to weaker foreign demand

Dealer Takedown: 10.5%, close to the 10.9% average. ⚖️ Roughly in line, not a major driver either way.

While the strong tail and direct bidder interest are definite positives, the lower bid-to-cover and drop in indirect interest indicate a less broad-based appeal. For an “A” auction, we’d expect above-average demand across all major bidder categories and a strong bid-to-cover.

Conclusion: Strong pricing and healthy direct interest, but only modest demand overall—a B-

This article was written by Greg Michalowski at www.forexlive.com.

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