Near Record Foreign Demand For Tailing 10Y Auction

The US Treasury sold $39 billion in 10-year bonds with a high yield of 4.066%, up from 3.648% last month. The auction tailed the When Issued price by 0.4 basis points, a reversal from last month's 1.4 basis points through auction. The bid to cover ratio was 2.481, down from 2.637 in September and below the six-auction average. Despite this, the internals were not bad, with indirect takedown rising to 77.6%. Foreign central banks may be seeking to buy US bonds now that yields are over 4%. Dealers were awarded 13.9% of the auction, while direct bidders took just 8.4%, the lowest since November 2018. This auction was unusual, with near-record foreign demand but subpar metrics. Yields were unchanged after the auction result, despite rising to a session high before the auction. Stocks continued to rise to new all-time highs, seemingly unaffected by the surge in yields. The auction's mixed results may reflect shaken faith in the Federal Reserve's easing plans.