The 10 yr auction was solid with a yield of 2.14% well below the when issued range of 2.18-2.19% and the bid to cover of 3.22 was above the 12 month average of 3.11. Also, direct and indirect bidders took the most since Feb. This auction follows the very good 3 yr note auction yesterday and comes on the heels of the FOMC saying they will keep rates at zero forever. Piling into this end of the curve, yielding 2.14% at auction, only implies worries about the economy and comfort with little inflation. Yields went to the lows of the day in response. As I mentioned yesterday, the bond market has conducted QE3 for the Fed with the dramatic drop in yields. While its technically not more quantitative easing because there is not new money being created out of thin air, the goal of it, lower yields, has been achieved.
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