After last month's stellar 2 Year auction, today's issuance of $26 billion in 2 year paper was a bit of a let down, printing at a yield of 1.261%, or a 0.1 bp tail to the 1.260% When Issued. The lack of a squeeze into the auction is perhaps the result of the lack of any 2Y specials in repo, where the OTR was trading comfortably, or 0.50% in the positive range. The yield was higher than last month's 1.23%, if below the 1.28% from December.

The bid-to-cover of 2.73 was below last month's 2.819, however above the last six auction average of 2.64. Total bids of $74.0b for $29.1b in notes sold vs six previous auction average of $71.1b in bids for $28.4b in notes sold.

However, the internals were modestly better, with dealers awarded 35.7% vs six previous auction average 46.9%. This was the result of a modest drop in direct bidders who were awarded 10.8%, compared to 20% last month, if again higher than the previous six auction average 13.5%. The silver lining was the strong Indirect take down, which rose from 49.8% last month to 53.6%, well above the six previous auction average 39.6%, and the highest Indirect take down for this tenor going back to February 2016.

Overall a solid auction, whose internals were measurably better than the headline print.

(Click on image to enlarge)