In today's first of two coupon auctions (due to the week's truncated schedule as the Fed is on Wednesday), the US Treasury sold $69BN in 2 year paper in a mediocre auction, yet one which was notably stronger than last month's issuance.

The sale stopped at a high yield of 3.812%, down from last month's 3.936% and tailing the When Issued 3.811% by 0.1bps. This however was a big improvement from last month's 1.8bps tail, which was the biggest since March 2023. 

The bid to cover was 2.653, a notable improvent from last month's 2.440, above the recent average of 2.61%. That said, the BTC has come in a very narrow range of 2.4 to 2.8 for the past decade with little variation. 

The internals were marginally weaker, with Indirects taking down 56.48%, down from 59.38% and below the recent average. And with Directs almost doubling from 16.50% to 31.65%, Dealers were left holding 11.87%, down from a surprisingly high 24.12% in March.

Overall, this was an average auction yet the fact that it was a solid improvement from last month's ugly 2Y sale should probably be enough to position the market well heading into the day's second auction, the sale of 7Y paper at 1pm ET.