Treasury 10-year auction preview: the wi has cheapened 1 bp to 2.74%
Treasury 10-year auction preview: the wi has cheapened 1 bp to 2.74%, but that, and dovish Fed comments, may not be enough to save the auction. Recent volatilty in yields took its toll on yesterday's 3-year auction and is likely to do so today. A stop here will still be about 17 bps rich to the December award rate, and the lowest since last January. One saving grace, though is that this reopening still has the 3.125% coupon from the November refunding. The note is mixed on the curve, but is not that attractive. Also, it has eased in repo, suggesting a minimal short covering bid. Additionally, demand for Treasuries really waned in recent years, though there are some natural buyers and bouts of flight to safety will support. The new German Bund saw decent, however, and that's promising. Also spreads to foreign sovereigns remain wide. So there could be decent indirect bidding. The December reopening (also $24 B) stopped at 2.915% and garnered a 2.35 cover, the lowest since February (2.51 average) and a 63.1% indirect bid (64.1% average). Direct bidders took 10.8%.