The US Treasury will auction $39 billion in 10-year notes at 1:00 PM ET. Yesterday the treasury auctioned off 3-year notes, which were met by average demand from both international and domestic buyers.

The results will be closely watched, with investor demand measured against the 5-key component 6-month auction averages.

Metrics to watch vs 6-auction avg:

  • Tail: 6- month avg. -0.9 bps. The difference between the high yield and the when-issued yield (pre-auction market rate. A negative tail is indication of strong bidding. A positive tail implies less demand

  • Bid-to-Cover: 6-month avg. 2.60x. Total bids received divided by the amount of debt offered. A higher number is an indication of strong demand

  • Dealer Take: 6-month avg. 12.3% .Primary dealers (big banks) who are obligated to bid at Treasury auctions. If the banks take more than the average, it indicates less investor demand.

  • Directs: 6-month avg. 16.1%. Domestic US buyers placing bids on their own behalf (e.g., corporations, pension funds, insurance companies). A higher number is indicative of strong domestic demand, while a lower number is weaker demand. .

  • Indirects: 6-month avg. 71.6%..Often seen as foreign central banks and international institutions.A higher number is indicative of strong domestic demand, while a lower number is weaker demand.

Source: Forex Live