21 billion of 10 year notes hit the tape with a .5 bps tail.  41.5% of the reopened issue went to Indirect bidders while Direct bidders took 11%.  The “street” took the remaining position of approximately 47.5%.  Bid to cover was a respectable 2.99 to 1.  We’ll give the auction a B, not to hot, not to cold, but just right considering yesterday’s disaster and the tough hedging environment that fixed income investors are in today.

Reaction, post auction has seen the 10 year note slip a few ticks, now off 18/32’s.  Mortgage backs are off 4/32’s, 1/32nd worse than the pre-auction release.  Not much has changed with our bias which remains tactically neutral/bearish short term.  With another 13 billion of 30 year paper on the block tomorrow, choppy trading and volatile conditions will persist.