The Treasury will auction $58 billion in 3-year notes at 1:00 PM ET, launching this week’s coupon supply calendar. Results will be closely watched, with investor demand measured against the 5-key component 6 month auction averages.
Metrics to watch vs 6-auction avg:
Tail: 6- month avg. 0.5bps. The difference between the high yield and the when-issued yield (pre-auction market rate. A negative tail is indication of strong bidding. A positive tail implies less demand
Bid-to-Cover: 6-month avg. 2.62x. Total bids received divided by the amount of debt offered. A higher number is an indication of strong demand
Dealer Take: 6-month avg. 15.1%.Primary dealers (big banks) who are obligated to bid at Treasury auctions. If the banks take more than the average, it indicates less investor demand.
Directs: 6-month avg. 18.7%. Domestic US buyers placing bids on their own behalf (e.g., corporations, pension funds, insurance companies). A higher number is indicative of strong domestic demand, while a lower number is weaker demand. .
Indirects: 6-month avg. 66.2%.Often seen as foreign central banks and international institutions.A higher number is indicative of strong domestic demand, while a lower number is weaker demand.
More ahead:
10-year reopening tomorrow
30-year reopening Thursday
The auction's strength—or lack thereof—could influence rate direction and market sentiment heading into the rest of the week’s supply.
This article was written by Greg Michalowski at www.forexlive.com. Read More Details
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