Solid 10 yr note auction, why?

The 10 yr note auction was solid. The yield of 4.438% was 2 bps below the when issued pricing. The bid to cover of 2.67 was well above the 12 month average of 2.49 and the highest since February 2022. Also, direct and indirect bidders took almost 89% of the auction, leaving dealers with about 11% and that is the least since August 2023.

Bottom line, after a soft 3 yr auction, this is the best 10 yr auction we’ve seen in a while, and as stated the best bid to cover since February 2022. As I always say, I wish we can hear the messaging from the buyers to discover their motive, whether buying is strong or weak. Either way, the US Treasury is finally smiling after many, many months with at best mediocre auctions. The 10 yr yield is at the low of the day in response, down a few bps from right before the results were reported. It seems that the 4.50% 10 yr level is a swing level that the market is carving out.