10 year note auction weak

The reopening of the Nov 10 yr note auction was on the weak side as the yield was about 4.5 bps above the when issued and the bid to cover, while in line with the average seen this year, is the smallest since Aug at 2.62. Also, 32.9% going to indirect bidders is below the average of the prior 6 at 45.6% and the smallest of them. Ahead of this auction and in light of the sovereign credit rating agency news from Dubai, Greece and Spain this week, the 5 yr CDS in the US today is at 35 bps, the highest since July. The UK 5 yr CDS as a comp is up 8 bps today to 84, the highest since June. Tomorrow the Treasury comes to market with the 30 yr bond and will be even a tougher sell than today’s benchmark 10 yr because of its length and lack of inflation protection.

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