PREVIEW: US to sell USD 42bln of 10-year notes at 18:00BST/13:00EDT
Auction History
- Tail: (prev. 0.2bps, six-auction average 0.4bps)
- High Yield: (prev. 4.282%, six-auction average 4.183%)
- B/C: (prev. 2.43x, six-auction average 2.47x)
- Dealer: (prev. 10.8%, six-auction average 10.3%)
- Direct: (prev. 23.9%, six-auction average 21.1%)
- Indirect: (prev. 65.3%, six-auction average 68.5%)
Primer
The 10-year yield currently trades at 4.451%, above both the prior 4.282% high yield and the 4.183% six-auction average, offering attractive outright yields for today’s auction.
Meanwhile, volatility has eased, with the MOVE index — a measure of Treasury market volatility — now trading around 70 versus roughly 80 at the time of the April 10-year offering, which may help support participation.
The April auction saw mixed demand dynamics, with direct bidders returning after a recent slump while indirect participation softened. The combination of higher yields and lower volatility could help support demand again at today’s auction.
Although in a different part of the curve, similar dynamics were seen in Monday’s 3-year auction, where direct demand recovered while indirect demand eased. However, part of that move may simply have reflected a reversal of April’s unusually weak direct demand and exceptionally strong foreign participation.
The upcoming auction of USD 42 billion in 10-year notes is positioned against a backdrop of relatively attractive yields, given the current trading yield of 4.451%. While volatility in the Treasury market has moderated, which may enhance demand, the mixed participation seen in previous auctions suggests potential uncertainty in investor interest. This auction will be telling for overall appetite for U.S. debt and could impact yields and risk sentiment across broader markets.