Treasury 10-year auction outlook: the offering could benefit from safe haven
Treasury 10-year auction outlook: the offering could benefit from safe haven flows, although the drop in yields amid North Korea tensions could price out possible bidders. The when issued rate was down almost 5 bps to 2.220%, but has since edged up to 2.230%. A stop there would be the richest going back to November (excluding June's sale). The note isn't that attractive on the curve either with a flattener in place today. The 2s-10s spread is at 89 basis points, near the narrowest going back to late June. However, with inflation remaining relatively benign, and some concerns over the debt ceiling and the possibility of delayed auctions, buyers may surface nonetheless (as evidenced with yesterday's 3-year). There should be a solid indirect bid given the flight to safety and the wide spread to foreign sovereigns. The note trades at a yield premium of 179 basis points to the German Bund. The July offering stopped at 2.325% and saw a 2.45 cover (2.44 average) and a 64.8% indirect bid (63.8% average). Direct bidders accepted 5.7%, while primary dealers took 29.5%.