Highlights
Results were mixed for the monthly 2-year auction, but the Treasury is probably pleased in any case given the large $24 billion offering size. Coverage was solid at 2.33 but the stop-out rate at 2.237 percent was 1/2 basis point above expectations. Indirect bidders only took down 19 percent of the offering, a record low and far below the 36 percent average. Non-competitive bids totaled only $597 million, about $150 million below average. The indirect bidder and non-competitive bid totals indicate that demand among retail customers and small investors was definitely below normal. Upcoming Treasury supply including a 5-year auction tomorrow and 30-year and 10-year auctions next week likely hurt demand. The longer term prospect of rising offering sizes, the result of the deepening budget deficit, may also be a factor. Treasury yields rose in immediate reaction to the results.