As we suspected, the early morning trade was being sat on by traders looking to buy the auction cheap. It’s one of the things money managers try to do, talk or sell the market down so they can buy auction paper at the best level possible. Check out the results; 29 billion came at a yield of 2.744% with 52.1% going to the Indirect Bidders (very good). Bid to cover a respectable 2.85 to 1 bid and like the 5 year auction, the issue priced through the screen by 1.9 bps (excellent). In other words, buyers of the issue were stacked deep and had to bid up if they wanted the paper. Give this one a solid B to B+. As a result of auction, notes, bonds, and mortgage backs have all caught a bid. 10 year note is plus 9/32’s (yield 3.39%), mortgage backs up 5/32’s, 30 year bond up 10/32’s, and ever the Dow is plus 9.
Scott S. EggenSenior Vice President – Capital Markets
PrimeLending, A PlainsCapital Company18111 Preston Road, Suite 900Dallas, Texas 75252
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