Historically low interest rates did nothing to dissuade buyers of the just issued 10 yr note auction which was great to the point of being off the charts. The when issued was almost 5 bps below the when issued and the bid to cover of 3.61 was well above the previous 12 month avg of 3.09. Furthermore, direct bidders took a whopping 45.4% (vs 20.8% in June, 15.8% in May and 11% in April) of the auction which combined with the 40.6% from indirect bidders, dealers got only 14%, the lowest I’ve ever seen. I can’t specifically say why there was such huge demand today but we can safely assume that the worries about global growth and European debt concerns are the reasons. Also sprinkle in a bit more of Operation Smother the Yield Curve which now continues.
