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10Y Auction Tails, Bid to Cover Drops In Mediocre Reopening

One day after the Treasury sold 3Y paper in a surprisingly strong, "stopping through" auction when equities were hit by the surprising Trump Jr. news, moments ago the Treasury sold $20 billion in a 9-year 10-month (Cusip X88) reopening, which stopped at a yield of 2.325%, a 0.4bps tail to the 2.321% When Issued and the fourth consecutive tailing 10Y auction. The high yield was above last month's 2.195% and the highest since May's 2.4%.

The internals were similarly on the weak side, with the bid-to-cover coming at 2.45 vs last auction's 2.54 and below the 6 month average of 2.49. Total bids of $49.4b for $20.5b in notes sold vs $50.9b in bids for $20.0b in notes sold at last auction. Foreign demand remained solid, however, with indirect bidders awarded 64.8% vs last auction 66.1% and below the 65.6% 6MMA, Directs posted a modest increase from June's 5.3%, rising to 5.7%, if again below the 6 auction average of 7.4%, leaving dealers with an award of 29.5% vs last auction 28.6%.

Overall, a mediocre reopening with metrics coming on the weaker side of recent averages, which perhaps was surprising in light of today's dovish testimony by Yellen, although in light of recent higher yields in the 10Y bucket this may have been as good as it gets.