Treasury 10-year auction preview: lots of uncertainty
Treasury 10-year auction preview: lots of uncertainty surrounds the sale given the drop in yields amid heavy safe-haven buying. The wi yield is down over 2.5 bps to 2.240%, but was as rich as 2.21% earlier. A stop in this area would be the second richest going back to November. Nevertheless, the offering should benefit at the margin as a result of the flight to quality flows on North Korea worries. The note is fairly valued on the curve. There should also be a decent indirect bid. But, much of the short base was probably squeezed out. 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%.