Following yesterday's unexpectedly ugly 3Y auction, bond traders were closely looking at today's 10Y reopening of CUSIP 4n7 to see if the weakness would persist. And, in what may come as further bad news for the bond bears of which the latest CFTC commitment of traders report showed there is now a record amount, moments ago the Treasury sold $22BN in 10Y paper in what was a very strong auction, pricing at a yield of 2.859%, stopping through the When Issued 2.862% by 0.3bps and the lowest stop on a 10Y auction since April, well below last month's 2.965%.

The internals were also solid: the bid to cover of 2.57 was below the last auction but above the 6 month average of 2.52, while the takedown showed that Indirect bidders jumped from last month's modest 56.0% to 65.0% in July, the highest since March, and with Directs taking down 10.5%, Dealers were left with 24.5% of the auction, the lowest since January 2018 as customer demand rebounded.

Overall, this was a very strong auction, perhaps the result of an earlier concession as a result of the modest selloff in the benchmark security, which pushed the yield from 2.83% to 2.86% at the highs.

But the take-home is that for all the concerns about the Fed's balance sheet roll off, primary market demand for 10Y paper still remains as solid as ever.

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