The 2 year note auction was very strong as the yield was about 3 bps below where the when issued was traded and the bid to cover at 3.63 is the highest since Aug ’07 and well above the one year average of 2.65. Indirect bidders totaled 44.5%, about in line with the previous few. With the October economic data out so far on the light side and persistent commentary from Fed members that rates will stay lower for longer, buying the two year note is a direct bet that monetary policy will not be reversed anytime soon and today’s auction is quite a vote on that belief.
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