Highest Indirect Demand In Over 6 Years Leads To Surprisingly Strong 2 Year Auction

After today’s Bill auction which once again saw rising yields at multi-month highs, supposedly due to Fed rate hike concerns, many were watching today’s 2 Year auction carefully to see if rising rate pressures will put a dent in short-end maturities. The answer was a resounding no, when moments ago the Treasury sold $26 billion in 2 Year paper at a yield of just 0.69% (as a reminder the Fed’s leaked staff projection forecast a FF rate of 1.26% at the end of 2016 or inside the maturity of this bond), pricing 0.8bps through the 0.698% When Issued, and suggesting there may have been another short squeeze into the auction.

The auction’s internals were also solid, with the Bid to Cover jumping to 3.418 from 3.276 a month ago, the highest since March, and leaving Directs 17.88%, while the real action was for the Indirects who ended up holding 54.37%, or the most since June 2009.

It appears those foreign central banks just can’t get enough of US Treasurys, even it means a money-losing yield (assuming the Fed does in fact hike rates), as long as they can get their hands on some of that all too scarce “money equivalent” collateral.

via Zero Hedge http://ift.tt/1JsE1cZ