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Blistering 10 Year Auction Driven By Second Highest Foreign Central Bank Takedown On Record

If yesterday's 3Y auction was solid across the board, then today's sale of $21 billion in 10Y was an all around show-stopper.

With the high yield printing at 2.066%, the lowest since February, and down materially from September's 2.235% when pre-rate hike jitters eliminated some of the demand. There were no demand issues this time, when despite a slight drop in the Bid to Cover, foreign central banks, i.e., Indirect bidders, took down a massive 62.2% or $13.1 billion of the final allotment, which was not only far above the TTM average of 55.3%, it was the second highest on record, surpassed only by the 71.3% takedown in February 2011. This left 27.5% to the dealers - the least since May - while Directs ended up with 10.3% of the final amount.

Once again, the strength in primary issuance continues with notable disregard for what happens in the second market as foreign central banks take advantage to roll out of Off the Run CUSIPs and purchase as much OTRs as they can with every subsequent auction.

That said, if going by the surge in demand fo benchmark paper, nobody has any concerns about CPI-measured inflation any time soon.