The 2 yr note auction was totally uneventful. The yield of 1.596% was slightly above the when issued of 1.59%. The bid to cover of 2.74 was a touch below the one year average of 2.79. Direct and indirect bidders took 62% of the auction, spot on with the 12 month average.
Bottom line, what is most interesting about the auction was not the results which were as dull as can be but why it wasn’t better. The highest yield in 9 years couldn’t bring us a better auction than this? I’ll say this, every day we hear about synchronized global growth which certainly is true but if sustained, global interest rates are not just going to sit here at low levels. Of course we’re seeing a rise in yields recently but they will have a ways to go if this ‘synchronized recovery’ gains any further traction or at least carries on as is. If rates don’t rise further from here in 2018 it will be because central banks via their tightening will end this recovery.
THE 2yr NOTE YIELD