Poor auctions, 3 yr worse than 10 yr/More on the thoughts of the consumer

Maybe it’s nervousness ahead of CPI tomorrow, the Fed meeting Wednesday or maybe in response to the sharp drop in rates over the past month that makes them less attractive but the 3 yr note auction was poor. The yield of 4.49% was about 2 bps above the when issued. The bid to cover of 2.42 was well under the one yr average of 2.70 and that is the lowest since February. Also, dealers got left with the highest percentage of any 3 yr auction since October 2022. The 3 yr yield is quietly back to a 2 week high.

The 10 yr auction was weak too but not as much as the 3 yr. The yield of 4.296% was about 1.5 bps above the when issued. The bid to cover of 2.53 was just above the 12 month average of 2.47. Direct and indirect bidders took 83% of the auction vs the one yr average of about 85%, leaving the dealers with the balance.

Treasuries, which were weak before the results, saw yields go to the high of the day after the bad 3 yr and are little changed in response to the 10 yr. Obviously CPI and the Fed are key from here and we’ve seen the inflation expectations reports in Friday’s confidence figure and what we saw today, which I talk about below, had little impact.