Stellar US Govt 10Y and Equities Weak

US Govt 10Y $35B auction saw a big 3bp stop-thru starkly different than the 3Y auction yesterday. Investors were happy to take down the 10Y duration and given the record net spec shorts in the treasury complex as a whole, we can’t imagine the snap back come the first whiff of any real FOMC dovish talk.

We know pension and insurers will gladly take down this kind of yield and duration and it was obvious in today’s auction. The Bid to Cover was 2.66 up from 2.53 last time and indirects jumped to 79.5% which was the highest on record! It was obvious dealers were seeing demand as earlier 30Y and 10Y basis weakening slowly ground up into the auction where in this mornings post the 30Y and 10Y basis were -9.6 and -3.0 respectively and now +6.4 and 3.4 respectively showing the strength of cash demand vs futures from earlier today: