One day after we predicted that a short squeeze was coming for bonds as a record number of shorts had emerged in 10Y TSY futures…
And squeeze pic.twitter.com/E64lkrnU3X
— zerohedge (@zerohedge) April 24, 2023
… yields indeed have slumped, with 10Ys dropping to session lows below 3.40%, down more than 10bps on the day. So with substantial demand for safe havens, and with the short-end of the curve also benefiting, it’s hardly a surprise that today’s 2Y auction was solid
Pricing at a high yield of 3.969%, the auction stopped 4.2bps higher than last month, and tailed the When Issued 3.966% by 0.3bps. This was expected in light of the sharp decline in yield ahead of the auction.
Other metrics were far more solid: the bid to cover came in at 2.68, well above last month’s 2.44, and above the six-auction average of 2.66.
The internals were also solid, with Indirects taking down 61.2%, well above last month’s 52.8%. And with Directs awarded 19.9%, slightly below the recent average of 22.0%, Dealers were left holding 18.9%.
Overall, this was a strong auction despite the modest tail, and as yields slide lower today, we just may see another substantial squeeze send the TSY complex spiking much higher by EOD.
Tyler Durden
Tue, 04/25/2023 – 13:32
