Treasury's $40 B 2-year auction was mixed as a confluence of factors impacted
Treasury's $40 B 2-year auction was mixed as a confluence of factors impacted, including safe haven flows, Fed rate cut expectations, geopolitical uncertainties, and some hesitation ahead of comments from Fed Chair Powell. The offering priced well, stopping at 1.695%, through the 1.705% at the bid deadline. It was as rich as 1.67% in early action before spiking on comments from the Fed's Bullard (who rejected the need for a 50 bps easing currently). Yet, today's rate is still much richer than the 2.125% award from May. Indeed, it is the lowest since October 2017. There were $103 B in bids for a 2.58 cover, weaker than the 2.75 last month and the 2.63 average, perhaps a result of the Bullard comments. Indirect bidders were awarded 48.5%, a little better than last month's 46.6% and the 46.3% average, but that makes sense as the yield provides a very attractive 245 bp pick-up versus the German Schatz. Direct bidders took 24.2%, a little below the prior 27.2% previously, which was the best since May 2016. Primary dealers accepted 27.3%, fractionally more than the 26.2% last month.