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Unmasking Of "Mystery Treasury Buyer" Has No Impact On "Uneventful" 3 Year Auction

If there were any concerns that today's revelation that Element Capital had been the "mysterious" seller of US Treasurys would for some reason shove a spike through the spokes of Treasury auctions, these were unconfirmed at least according to the just completed 3 Year auction, which priced at 1.056%, 0.1 bps through the When Issued 1.057%, if the highest pricing yield since June's 1.125%. Curiously, the auction was well-bid even though the repo rate first thing this morning on the 3Y Off The Run was a decent 0.12%, with the only shortage evident in the 10Y which was again trading special at -0.95% if better than last Wednesday's -2.30%, suggesting there are ongoing disturbance in the repo market.

Charts: Stone McCarthy

The internals of the auction were solid if not groundbreaking: the Bid to Cover was 3.233, fractionally below the TTM average of 3.286, the Dealer take down of 41% was the highest since February, while Indirects ended up withe 51% of the takedown, above the 45.7% TTM average. Finally, Directs were awarded just 8.0% of the auction matching the lowest since February.

In short: a perfectly average auction, one which did not attract particular attention for any one reason. Which is why, tomorrow's 10Y auction will be far more closely watched.