After a good 3 yr note auction, the 10 yr auction was much more mixed. The yield of 2.195% was above the when issued of about 2.19% but the bid to cover of 2.54 was above the one year average of 2.44. Dealers got stuck with 29% of the auction which is exactly the average of the previous 12 months.
Bottom line, we can call this auction a ‘nothing burger.’ I’ll make sure never to use that phrase again but I unfortunately can’t get it out of my head after hearing it last week after Comey spoke. After a good 3 yr and a mediocre 10 yr one would think we’d see some steepening in the curve but not the case today. The 2s/10s spread is back down at the multi month lows at 84.5 bps. Again, the market is sniffing out that the Fed is hiking rates into a mediocre economy with one of the most interest rate sensitive sectors, autos, that is now entering a recession.