The U.S. Treasury sold $39 billion of 10 year notes at a high yield of 4.175%

• WI level at the time of the auction 4.175%
• Tail 0.0 basis points versus 6 month average of 0.0 basis points
• Bid to cover 2.55X vs 6 month average of2.51X
• DIrects 20.96% vs 6 month average of 20.5%
• Indirects 70.24% vs 6 month average of 69.5%
• Dealers 8.81% versus 6 month average of 10.0%

AUCTION GRADE: C+/B-

The 10 year note auction came in with a 0.0 basis point tail which is precisely the six-month average. The bid to cover was just marginally higher than the six-month average. The domestic the bidders were just above the six-month average while the in directs were also just above the six-month average. As a result the dealers were saddled with about 1.2% less than the norm.

That was good enough for a C+/B- grade in my view.

There is little reaction. However, in general, the 10 year yield is comfortably above the 4.0% level at 4.17%. Recall that toward the end of November, the yield reached a low of 3.962%. The current level is near the high levels going back to September 26 and is also near a swing area between 4.17% and 4.199%. Move above that area and we could see a further pop in yields.