16 billion of 30 year bonds hit the tape to yield 3.954% with a bid to cover of 2.77 to 1 (average is 2.72 to 1). The issue had a tail of 1 bp, similar to a schnauzer. Indirect bidders took 46% (not bad) while direct bidders (Wall Street) took 18% (not too hot). Overall, it’s a pretty good auction. We’ll give it a B-.
Price action post auction has not done anything to help Austin mortgage pricing. Sell side orders are still on the heavy side with MBS still off 15/32’s. As I mentioned earlier, we don’t see this as a major trend change or a sentiment shift towards the bears. Just a more realistic, balanced value trade in the coming days that has priced in all the bad news it can. Careful out there.