US Auctions will be closely monitored this week!

On February 25th, the Treasury auctioned 7-year notes. It did not go well.

FED 7

This week, the US Treasury will be auctioning off the following:

  • Tuesday: 3-year notes
  • Wednesday:  10-year notes
  • Thursday:  30-year bonds

In addition, the Treasury will also be issuing a few short-term duration bills (less than 1 year).  There is also a good deal of corporate bond supply this week.  

Recall on February 25th when the Treasury auctioned 7-year notes.   It did not go well.  As a result, bond prices moved lower (on less demand) and yields moved higher (yields move inversely to bond prices):

5-Year Yields


Source: Tradingview, City Index

10-Year Yields


Source: Tradingview, City Index

Terms to know for the auction:

In addition to yields (which should be compared the previous auctions) There are several data points released after the results of the auctions are made available (usually a few minutes after 1:00pm ET).  However, there are two important ones to pay attention to in order to determine if an auction went well:

1)      Bid-to-Cover (from Investopedia): the dollar amount of bids received vs the amount of Treasury securities sold.  Bid-to-Cover ratios typically exceed 2.0.  A successful bid-to-ratio should substantially exceed the average of the 12 previous ones.  A low ratio is an indication of a poor auction. 

*The bid-to-cover from the 7-year auction on February 25h was 2.045, the lowest on record

2)      Indirect vs Direct bidders (from Investopedia): An indirect bidder, commonly a foreign entity) bids throughs another party.  A direct bidder purchases the Treasuries during the auction for themselves or their house account.   Indirect bidders are often used as a proxy for demand by foreign investors.

*In the 7-year auction on February 25th, only 38.06% of the bidders were indirect bidders.  This left direct bidders (mainly primary dealers) taking away the balance of the auction.

Market Reaction:  With the weak 7-year auction on February 25th, the markets sold bonds, sold stocks, and bought US Dollars ( as yields went higher).  Traders could expect a similar reaction this week if they auctions are poor.  Therefore, US Dollar counter currencies should move lower verse the US Dollar if results are poor.

Learn more about forex trading opportunities.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.