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Ugly 30 Year Auction Tails Big As Direct Bid Tumbles To Lowest Since March 2013

Yesterday's 10 Year auction was impressive, but one can't say the same about the just concluded, and final for the week, 30 Year reopening auction of Cusip RK6 which saw a whopping tail 3 bps to the 2.567% When Issued, when the the High Yield priced at 2.597% (still, about 8 bps tighter than the March 30 auction). The main driver of this subpar demand was not the Bid to Cover ratio, which while very low in historical terms was unchanged from last month at 2.18%, but the collapse in the Direct bid, which took down just 7%, the first single digits Direct take down since May of 2014, and the lowest overall since the 4.9% in March of 2013. However, the Direct slack was more than eagerly sopped up by foreign central banks which took down a near record 51.3%, just shy of the all time high of 53.2%. Dealers were left with 41.8%.

Some more statistics from Stone McCarthy:

The 30-year bond auctions have stopped through their respective bidding deadlines by an average of 0.2 basis points over the past year, but there have been significant tails at the most recent three auctions, and the second reopening auctions over the past year have also stopped with an average tail of 0.4 basis points. The average bid/cover for 30-year bond auctions over the past year was 2.43, and the average for the four second reopening auctions was little different at 2.41. The bid/covers have been significantly smaller, however, at the bond auctions so far this year.

The result: a big hit on the long end of the bond curve which saw the 30Y trade promptly lower to 2.60% and likely wider as the surprise weakness in today's auction is digested by the secondary market.