Record Directs Save Ugly 3Y Auction, As Slide In Foreign Demand Leads To Biggest Tail Since May

In the week's first coupon auciton (we have an accelerated schedule due to Veteran's Day when cash bonds are shut for trading), the Treasury sold $58BN in 3 Year paper in what was a mediocre sale.

The high yield of 4.627% was below last month's 4.932% (the second highest this decade), but unlike the October auction which stopped through, today's sale tailed the When Issued 4.622% by 0.5bps, the biggest tail since May. 

The bid to cover was ugly, sliding to 2.528 from last month's 2.616 and the lowest since August 2025. 

The internals were just as ugly: Indirects slumped to 55.5% from 57.6%, also the lowest since August 2025. And with Directs taking a record 35.04%...

... Dealers were left with just 9.5%, one of the lowest on record.

Overall, this was a clearly subpar auction, where the slide in bid to cover and foreign demand, suggested that demand for short-end paper has gotten notably more challenging than in recent months.