With the 3 Year trading modestly tight in repo, and just above 0% after being special for the prior three days…

… some expected another strong auction, with the yield stopping through the When Issued.

However, perhaps as a result of the bid for TSY paper during today’s trading session, moments ago the Treasury announced that the 3Y priced at a yield of 1.525% (below last month’s 1.63%) and tailing by 0.08%, the highest tail going back to mid summer 2016.

The Internals were mixed. There were total bids of $63.1BN for $24.2BN in notes sold; with Indirects taking down more than half of the auction, or 51.8%, above the 6 month average of49.8%, while Dealers were left with 39.9%, or just below the 6 month avereage. Direct ended up with 8.3%, or right on top of the recent average.

However, it was the Bid to Cover that was most troubling, sliding to just 2.62, well below the 6 month average, and the lowest going back all the way to July 2009.

Overall, a mediocre auction, which while indicating stable foreign interest, will surely disappoint bond watchers today, or as Stone McCarth put it “not so good”